Mortgage Advice

Good advice is essential

Before choosing your mortgage you should consider taking advice from a professional independent adviser registered with the Financial Services Authority [FSA]. Although the FSA do not regulate Buy to let mortgages, their members follow a code of conduct which is in place to protect the consumer. FSA intermediaries have an obligation to provide the most suitable advice on residential mortgages and this practice is generally carried over into the Buy to Let marketplace.

Your adviser will tell you about all the costs and fees relating to your purchase before completing your application form to the lender. A good adviser will tell you that as well as your mortgage payments you would need to pay for other costs relating to the property such as building insurance, maintenance costs, mortgage repayment increases due to rises in interest rates, your responsibility to continue to make mortgage payments during rental void periods and any redemption penalties payable to the lender for early repayment of your loan.

Assessing security offered for a mortgage

Generally a decision as to whether or not a lender will offer you a Buy to Let Mortgage is usually based on the size of the deposit available, the rental income achievable as well as your earned income, unless the scheme offered on a Self Certification basis, then proof of earned income is not required. Typically the Lender requires that the rental income achievable should equal in the region of 130% of the pay rate, based on an interest only basis. This will vary from Lender to Lender and the scheme terms they are offering. Therefore it is important to shop around for the mortgage that meets your criteria. The Lenders Valuer will generally assess the rental income achievable for the property and the results can often reduce the amount of loan granted. The overall affect would then result in larger deposit being required or looking for another property.

Planning ahead

At outset you should decide what is your primary objective and the length of time you are likely to retain the property. This could have an impact on the type of mortgage you choose and its terms. For example if you are planning to sell the property within the short term you should look for a loan which offers limited or preferably no redemption penalties. As a guide you should be aiming to achieve a gross rental of about 135% of the mortgage repayments based on an interest only loan. Generally this should give you a cushion to cover other running costs and any void periods.

Refinancing existing properties

Equity held in other properties can be released to fund the deposits to purchase of new properties, and additional finance can be raised to cover the shortfall by means of a Buy to Let Mortgage. One of our independant mortgage advisers will be pleased to advise you on the most suitable mortgage product and structure your portfolio according to your requirements.