When looking for the best buy to let mortgages, there are a number of things you have to keep in mind. First, regardless of the advertisements you see, getting this financing is not easy. Yes, more and more companies are offering it, but they are still quite strict about who they approve.
Here is a quick explanation of what buy to let financing is. It is a mortgage for long term investors who are looking to cover their mortgage expenses with the rental income they make. This is a very simplified explanation, of course.
As you can tell, the idea is to make long term income from the property. This is an alternative to the ever popular flipping, which is done in the UK, and many investors are opting for long term investing instead. It does take some time before you turn a profit on a particular property, but eventually the income can really add up when you have multiple properties.
However, as mentioned, getting financing is not easy. Generally, those who have the best chance of getting approved are large established UK investment companies. Smaller investors are much riskier because they have a higher chance of defaulting. That is not to say that you cannot get a mortgage if you are just starting out. However, you will likely have to pay a higher interest rate, and you might have to make a larger down payment as well.
Typically, companies in the United Kingdom will give out up to 85% of the total value of the property for the mortgage loan. For this reason, the down payment you have to make is often quite sizable, and this is something that scares many investors off. In a lot of cases you have to pay 18-25 thousand pounds upfront. This means if you are only making one hundred pounds a month from the property, it will take you a long time to break even. Therefore, you probably need a bit of savings before you can start investing in property using these mortgages.
As far as how to be approved, the companies will look at a couple things. First, they want you to have a proven track record of paying off buy to let financing successfully. If not, as mentioned, the interest rates and down payment will be higher.
In addition, they want you to have a good plan on how you will be profitable with the new investment. In most cases, they want you to make 120-150% of the mortgage costs in rental income. Therefore, if you cannot definitively show how you will achieve that, you will not get approved.
The bottom line is, buy to let mortgages are definitely within reach for many people. However, you will need a sizable amount of savings, in all likelihood. To find the best buy to let mortgagesinterest rates, make sure you shop around and get at least 10-20 quotes prior to selecting a particular company.
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