What Exactly is Buy-To-Let?
Buy-To-Let is pretty much what it sounds like – purchasing a property with the sole intention of renting it out. It’s a smart way to generate a steady rental income and potentially see your property value appreciate over time.
How Does Buy-To-Let Work?
Once you own a Buy-To-Let property, you become the landlord, renting it out to tenants. The rent you receive should cover the mortgage payments, property expenses (like insurance and maintenance), and ideally, leave you with a tidy monthly profit.
Introducing Buy-To-Let Mortgages
Now, here’s where Buy-To-Let mortgages come into play. These specialised mortgages allow you to finance your investment property and rent it out to tenants. But wait, there are some key differences between Buy-To-Let mortgages and standard residential mortgages:
The amount you can borrow is based on the property’s rental income versus the cost of the mortgage. Lenders typically want to see the expected rental income cover at least 125% – 145% of the monthly interest payments.
There may be a minimum salary requirement, usually around £20,000-£25,000.
Interest rates on Buy-To-Let mortgages are often higher due to the increased risk.
The minimum deposit required is generally 20-25% of the purchase price, with the cheapest buy to let deals requiring a deposit of 40% or more.
Arrangement fees can be higher, sometimes calculated as a percentage of the loan amount.
Most Buy-To-Let mortgages are interest-only, meaning you only pay the interest each month and repay the original loan at the end of the term.
How Much Can You Borrow?
The amount you can borrow for a Buy-To-Let mortgage depends on the rental income you expect to receive. Lenders usually require the rental income to be 25–45% higher than your mortgage payments. Keep in mind that with current market conditions, achieving this may be more challenging.
Deciphering Rental Yield
Rental yield is a crucial metric for assessing the financial viability of a Buy-To-Let investment. It’s calculated by dividing the annual rental income by the purchase price and multiplying by 100. A rental yield of 5-8% is generally considered good.
Finding Your Perfect Investment
Whether you’re eyeing properties closer to home in Bournemouth, Poole or Christchurch, or exploring opportunities further afield, it’s essential to consider rental yields if you are looking for monthly profit.
Ready to Take the Leap?
Armed with this knowledge, you’re well-equipped to embark on your Buy-To-Let journey. But remember, expert guidance from a trusted mortgage broker like Key To Mortgages can make all the difference. We specialise in Buy-To-Let mortgages in Bournemouth, Poole, Christchurch and beyond, helping you navigate the complexities of property investment with confidence. Let’s turn your investment dreams into reality!
Your home may be repossessed if you do not keep up repayments on your mortgage.
Commercial and Buy to Let Mortgages are not usually regulated by the Financial Services Authority.
We offer a free initial mortgage consultation. There may be a fee for arranging your mortgage and the precise amount will depend on your circumstances. We typically charge a fee of £595.00.