Living in the UK isn’t exactly easy on the wallet, which is why more and more people, especially young adults, are on the lookout for side hustles or clever ways to boost their income. Some are grabbing a rental property to bring in some extra cash each month or climbing the property ladder as a career option as a whole. To maximise the profit one can get in such an arrangement, many are concerned about securing best buy-to-let mortgage rates.
That’s where we come in, to help you secure the best deal. On this page, we will be discussing the a to z of buy-to-let mortgages. Let’s take a proper look at everything we should know about best buy-to-let mortgage rates, and what to do to navigate the seemingly tricky process.
Buy-To-Let Mortgage and Eligibility to Get One
For those who have already dealt with a regular mortgage, the drill is simple. The property becomes your home, your personal haven. With a buy-to-let mortgage, the game becomes commercial. You are not buying a place to live in but rather making an investment. It could vary from having long-term tenants to setting up a cosy spot for vacationers, or even short term rentals like Airbnb.
Such a type of mortgage is commercial in purpose rather than personal. Your main goal is to retain as much profits as you possibly can. The lenders you approach will also assess your application accordingly. They will place much importance on the rental yield when they are deciding on your loan amount. They may also set up deposit amounts to be higher due to the business aspect of the deal.
The Criteria
In the UK, it’s mandatory for all applicants in the mortgage to be over 18, whether solo or joint. As for the number of applicants, you can do it alone or with up to three others. You do not need to have any other property.
There are certain income requirements. If you’re looking to borrow up to £1 million, at least one applicant needs to have an annual gross income of £25,000. For loans exceeding £1 million, you’ll either need a gross income of £75,000 individually or a combined gross income of £100,000 for joint applications.
Maximum borrowing per buy-to-let property is set at £2 million. The total borrowing limit with one lender is £3 million and across different lenders is £4.5 million. You can mortgage a maximum of 6 rental properties with one lender. The number increases to 10 across different lenders.
Securing the Best Buy-to-Let Mortgage Rates
- Talk to a mortgage provider/specialist.
To get the best lifetime mortgage rates or the best commercial mortgages in the UK, you have to be connected to the right provider. Mortgage advisory services such as UK Mortgage Finder give you access to a range of options and help you choose the best. Specialised teams of experts understand your circumstances and bring a variety of mortgage deals, whether it’s from traditional banks or specialist lenders.
2. Reduce the lender’s risk.
To make your application look attractive, you may need to take a few steps to reduce the lender’s risk. If lenders find you particularly perilous, they will offer you high interest causing your profits to take a hit. A few ways to avoid that would be to take care of your loan-to-value ratio. Offering to pay a large deposit can influence your interest rates positively, as you are borrowing less money, leading to best commercial mortgage rates in the UK.
Second would be to maintain a strong credit profile by aiming to clear any existing debts and improving your score before application. Lastly, try to keep your debt-to-income ratio in check to come across as a financially stable individual.
3. Choose the appropriate mortgage type.
As there are many types of mortgages available, each one can bring you its own set of pros and cons. Choosing the right type gives you more chances of getting best mortgage rates. Fixed-rate mortgages lock in your interest rate for a set period, perhaps 2-5 years, which provides stability if interest rates are expected to rise. On the other hand, if interest rates drop, then variable-rate mortgages can prove to be beneficial, with considerable risks. Other mortgage types include guarantor, offset, tracker, etc. The mortgage market is full of jargon so an advisor can help you explain them in detail and get the best lifetime mortgage rates for you.
4. Apply at the optimal time.
When it comes to applying for a mortgage, timing is everything. This is why so many experts recommend waiting it out if you have any issues in your financial profile like a default or low credit score. There are also external factors that may impact the mortgage you are offered, like political or global events. You have to assess the market’s condition and pick the optimal time to apply for the best mortgage rates.
Common Myths about Buy-to-Let Mortgages
The mortgage market is filled with misconceptions, and falling for these traps can reduce your chances of securing the best mortgage rates. Let’s get some facts straight.
“Only experienced investors can get buy-to-let mortgages.”
Experienced investors are attractive to lenders but first-time investors have a great chance, especially if their application is well done. What matters is your rental income potential and financial standing, so don’t let your investment history come between you and the best lifetime mortgage rates.
“Rental income will cover all the costs.”
While rental income can contribute to mortgage payments, it may not always be sufficient. You need to budget for additional expenses such as repairs, maintenance, and void periods when the property is unoccupied.
“Buy-to-let is no longer profitable due to tax changes.”
Due to the changes in tax relief on mortgage interest, the profitability prospect may feel underwhelming. However, your profits depend largely on the structure of your investments rather than tax obligations. Plan carefully, offset costs accordingly, and give your all to secure the best commercial mortgage rates in the UK for a profitable venture.
Conclusion
When investing in a property, you need to do some careful planning to achieve best buy-to-let mortgage rates in the UK. It’s important to take some key steps to have the best shot at the ideal rates. It’s also crucial to understand tax implications and other factors to know where to settle in case of interest rates to maximise your profits. Working with an experienced mortgage broker can help you make all the decisions informed.
This is where our team at UK Mortgage Finder can help simplify the process for you with our in-house friendly and professional experts. Contact us today to start your investment journey.
