Although in the majority of circumstances Buy to Let mortgage advice is not regulated by the Financial Conduct Authority, we will still make our recommendation on the most appropriate buy to let mortgage for your circumstances as if we were giving regulated mortgage advice.
We have access to many exclusive buy to let mortgages that would not be available even if you applied directly to the mortgage lender. We pride ourselves on the exceptional service that you will receive and will take your buy to let mortgage from initial enquiry through to obtaining a credit scored decision in principle followed by submission of your mortgage application and then finally to successful completion of the mortgage.
We have come through a turbulent period in the Buy to Let market with many of the mortgage lenders having previously disappeared altogether & buy to let mortgage criteria being significantly restricted. Fortunately new entrants have launched & re launched into the buy to let mortgage market and loan to values are now being pushed again to 85% and there are more choice of lenders willing to proceed with 20% deposit or 25% deposit at more competitive rates.
Mosaic Mortgages has prepared an online Buy to let mortgage guide so feel free to read on to briefly discover about buy to let mortgages. Alternatively, click on the following links to jump directly to the relevant pages of the buy to let mortgage guide.
Introduction to Buy to Let Mortgages
Buy to Let has had a roller-coaster ride over the last ten years and according to statistics compiled by the Council of Mortgage Lenders(CML), outstanding mortgage balances increased from £5.4 billion at the end of 1999 to £52.2 billion at the end of 2004 before falling back to just £8.5 billion in 2009.
As the Buy to Let market was booming by the end of 2004 there were 526,200 new buy to let mortgages taken (according to CML statistics) but as not all lenders are members of the CML, this figure is potentially much higher. As the credit crunch hit in 2007, the number of new Buy to let mortgages was still estimated at 346,000 but as lenders shied away from buy to let, it dropped to 222,700 in 2008 & only a staggering 93,500 new mortgages in 2009.
Property has been seen as the must have investment – where better to put your money than in bricks and mortar? It can certainly provide a good investment return and reasonable capital growth but there are also pitfalls to be wary of.
If you are looking for advice relating to specific areas of buy to let mortgages then please follow our brief guide over the next few pages as well as making use of our buy to let mortgage calculator and mortgage sourcing tool to find the best rates. However, please feel free to contact us to discuss your specific requirements.
We are not linked to any particular lender or panel of lenders and thus can offer truly independent buy to let mortgage advice on over 600 different buy to let mortgage schemes currently available in the UK buy to let mortgage market. We have also got access to many exclusive mortgages that you will not be able to find on the High Street and would not be offered even if you approached the lender directly.
Buy to Let Mortgages - Deposit
If you were to approach a bank on a “commercial” basis to buy rental property then they most certainly would be looking for a deposit from you of at least 30% (So if the property was valued at £100,000 then they would require you to fund £30,000 and would lend you £70,000) however at the time of writing, the majority of high street lenders are over-committed in this area and many are no longer willing to lend at all. The specialist buy to let mortgage market was born to make it easier for landlords to arrange funding and lenders would only ask for 20-25% deposit.
During the boom, the market moved on (perhaps too much with hind-sight) and it became commonplace for the required deposit to be only 15%. There were even lenders that were willing to accept only 11% deposit however the achievable rental yield tends to drive the amount of deposit required and in essence whether a property is a viable proposition or not to the investor.
The market appears to have come full circle and following the credit crunch, loan to values have been restricted and deposit requirements vary from lender to lender – Some want 35% deposit, the majority are comfortable at 25% deposit and there are a couple of lenders that will offer 20% deposit (with higher rates and subject to credit score). Realistically, the more deposit that you are able to put down on the proposed purchase then the better rates that will be available to you.
Buy to Let Mortgages - Rental Yield
Most lenders undertake an assessment based on the rental income to calculate the maximum loan size that they are willing to lend but some still insist on a minimum provable earned income. Lenders are ideally looking for 115-130% coverage of the monthly payment (on an interest only basis) in rental income at the either the charge rate (usually if the scheme offered is a fixed rate) or the underlying rate charged. In simple terms, this would work as follows:
Property Value = £135,000
Deposit(25%) = £33,750
Required Mortgage = £101,250
Mortgage Product: 3 year fixed rate 4.79% and lender requires 125% interest cover
£101,250 X 4.79% X 125% = minimum annual rental income required
In this example, annual rental income of at least £6063 or £506 per calendar month would be needed to ensure that only 25% deposit (£33,750) is required. In view of lenders increased deposit requirements in the current lending climate, it is unusual & would be a poor investment if the proposed project did not meet this calculation.
Use our Buy to Let calculator to see how much you may be able to borrow and use our mortgage sourcing tool to find the most competitive buy to let mortgage rates available.