What is a buy-to-let mortgage?
Before going any further, let’s first define what a buy-to-let mortgage is. Basically, this set-up allows an investor to borrow money in order to acquire a property like any other mortgage loan in the Private Rented Sector. Therefore, the main purpose of the investment property is to be “let out” to tenants. This type of mortgage has been offered in the UK since the 1990s. Over time, many people think that buy-to-let mortgages are an expensive type of mortgage. This is a common misconception because buy-to-let mortgages are actually designed to help investors earn money even during the process of paying for the property. This is a great way to start a property portfolio or to add to an existing one. Many people are now landlords who have never been in the business before. Kevin Sewell Mortgages can assist with finding the perfect buy-to-let mortgage solution. Buy-to-let mortgages are assessed on the rental income of the property and normally the Lender will ask for a guide as to what rental the property can achieve. When the property is valued, the valuer will receive instructions from the Lender to give an estimated rental value of the property. A general basic formula used for this is that the rental income must exceed the mortgage payment by 25%. Whatever the maximum payments are, the rent must exceed that by 25%, e.g .a £500 monthly mortgage payment must have a £625 monthly rental. The mortgage payment is assessed if the mortgage is Interest Only, but this does not stop a mortgage from being a Repayment mortgage (i.e. where you pay capital and interest together).