UK Buy-to-let Mortgage Guide

As house prices continue their inexorable rise, yields on buy-to-let properties are dropping as it becomes increasingly difficult to cover a high percentage mortgage with rental income. However residential property as an investment refuses to abate. A recent survey by ARLA ( the Association of Residential Letting Agents ), well over half of buy-to-let investors have plans to purchase another property over the next twelve months. The margins are not what they used to be, so it is even more important to do careful calculations beforehand.

You just have to open your Sunday newspaper to see how much coverage is given over to buy-to-let as a now mainstream investment choice. It is very popular - not really that surprising, given the long upward trend in house prices. Buy-to-let using a mortgage is a 'geared' investment which means you can reap the rewards (or be hit with the loss) on an investment many times larger than your deposit.

Buy-to-let mortgages have taken off in the last eight years. They are specialist mortgages designed specifically for this type of property investment. Typically the deposit requirements are higher, the minimum deposit is around 15% and can be as high as 30%.

As the buy-to-let mortgage market has expanded, the competition between lenders has grown and with it the number of mortgage products. Landlords used to be restricted to expensive commercial mortgages. However buy-to-let mortgage products are now offered by nearly all the banks and building societies plus scores of smaller specialist lenders.

Many people start their life as landlords by remortgaging their own home, providing there is enough equity. This can significantly increase the cashpile required as a deposit by the lenders.

Letting out a property of course is a riskier exercise than paying for the roof over your own head. No surprise then that buy-to-let mortgages cost more in general than other types of mortgages. However there area range of deals around, the market remains competitive, and you can choose between a number of discounted and fixed rate products.

There are several different approaches taken by buy-to-let mortgage companies. Some have their own calculation broadly based on both your own income and the amount of rent their surveyors estimate your rented property will bring in.

Other mortgage lenders are only concerned with the amount of rental the property will return. Again they all use their own formula. One common method is to compare 1.3 times the annual mortgage payment with the annual rent. If the rent is higher, they will grant the loan. Other lenders will take 3 times your annual salary/income and add this to 50% of the expected annual rental and check to see whether this covers the mortgage payments.

The there are those lenders that use the 'deduction rule'. They take your salary, deduct the expected annual mortgage payments of it and then apply their salary multiple. That is the maximum amount they will lend. So say you earned £50,000. The expected annual mortgage payments come to £15,000. That gives £35,000 times their multiple, let's say it is 3.5, giving a total of £122,500, the maximum mortgage amount.

At QCK.com we have several expert FSA-registered IFAs on the team to ensure you obtain the very best value buy-to-let mortgage available - one that suits your individual requirements.

There are plenty of mortgage companies offering buy-to-let mortgages with various terms and rates that fluctuate by the month, Our experts have the experience and knowledge to match you with the best product at the right price.

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