How much can I borrow?
Are you looking for the best buy to let mortgage products with the best rates
payable? Itís important to know what you can borrow first and consider the
different options available to you.
Most lenders will offer a maximum loan of 85% against the investment property
for sale requiring you to fund at least a 15% deposit. Some buy to let mortgage
lenders may be in a position to offer more favorable rates if you have a higher
deposit available. With the buy to let mortgage industry as hungry for the
business as each other it is worth monitoring the market on a regular basis as
new products are being launched on an almost daily basis. Always find out the
best buy to let mortgage deals available at the time. Some investors may decide
to retain their entire investment property portfolio with one lender, but it is
important to realize that different products between different lenders can
provide you with maximum flexibility and cash flow depending on how you
structure your buy to let funding.
What If I donít have a Deposit?
If you are looking to invest in your first buy to let investment property but
donít have at least a 15% deposit, then you may find that you could release some
equity from your own residential property. Contact your current lender for more
details or find out more if you donít
have a deposit and how you can start your buy to let
Once you have established that you are in a good financial position to start on
your first buy to let purchase, then you will need to know what options are
available to you. Spend some time using some of the
buy to let mortgage quote systems and see how different buy to let mortgage
Buy to Let Mortgage Types
Variable rate buy to let mortgages
This is the lender's own mortgage rate and one that is subject to change
whenever the lender chooses which is at the same time of base rate changes. This
means that if you are on a lenders standard variable rate buy to let mortgage
product then your monthly repayments will increase or decrease accordingly
although they very rarely pass on the full percentage reduction to the client.
This type of product does also allow the lender to change the rate even if there
is no change in the Bank of England base rate. So if you are looking for
something a bit more palatable why not look at your other options.
Discount buy to let mortgages
For a set period, the lender offers a reduction on its SVR (standard variable
rate). Letís say, it might offer a discount of 1.5 per cent over three years.
However much the SVR (standard variable rate) increases or decreases during the
discount period, you always pay a rate 1.5 per cent lower.
Stepped Discount buy to let mortgages
Its also worth considering stepped discount buy to let mortgages, where the
level of the discount reduces after a set period. For example, you may be
offered a 1.5 per cent discount for a year, followed by a 0.75% per cent
discount for the second year.
Fixed-rate buy to let mortgages
Regardless of the (SVR) standard variable or changes in the base rate, this kind
of buy to let mortgage offers a fixed interest rate for a set period. The
monthly mortgage repayments will remain the same giving the property investor
the knowledge of what their monthly outgoings will be for a set term.
Capped-rate buy to let mortgages
The capped-rate buy to let mortgage offers a limit as to how high the interest
rate can go. The rate you pay can move up and down below that level but never go
beyond it. Your payments would reduce if there were any base rate decreases.
Drop-lock buy to let mortgages
This is a feature that is included in some buy to let discounted mortgages.
Initially you decide to opt for a discounted product but for a small fee you
have the option to drop into one of that lenderís fixed rate products. At which
time you would then be bound by the terms of the new fixed rate product.
Tracker buy to let mortgages
Tracker products can be a good option for buy to let investors. Tracker products
offer a margin over the base rate for certain periods of time. Some will offer a
buy to let tracker product which tracks the base rate plus a margin for a few
years whereas recently there are more products coming on the market where they
will track the base rate for the life of the loan. Providing it is a low enough
margin over the base rate and the base rate remains at a comfortable level, this
can be particularly cost effective to a buy to let landlord as it can avoid the
necessity for regular refinancing and the costs involved in the exercise.