Navigating ourselves through the labyrinth that is the real-estate landscape isn’t an easy task to embark upon. Since the advent of the real-estate business, an increasing number of individuals have started taking an interest or have either started investing their time, into investing monetarily into the real-estate industry, owing to its higher ROI (return on investment). Rather than simply buying a house for their own use, people are instead buying properties to rent them out, owing to the income they receive from their tenets or the income they receive from property value growth.
For such ventures, it becomes imperative to have a mortgage advisor on board, as they understand each intricate detail pertaining to the real-estate industry. They are essentially a shoulder to lean onto or a helping hand to help individuals steer the course of their direction, leading them to make an appropriate decision. If looking to buy a property for the mere means of renting it out, an individual needs to opt for a buy-to-let mortgage, as opposed to a conventional mortgage, as they both have differing parameters.
A mortgage broker will fundamentally help you understand the following mentioned-below, as a buy-to-let mortgage is sanctioned under the following conditions.
- The borrower wishes to invest in flats or houses.
- The borrower can afford and understands the risks associated with investing in a property.
- The borrower owns a house, be it with an outstanding mortgage.
- The borrower has a good credit history and doesn’t have too many sources of borrowings, e.g. personal loans and credit cards.
- The borrower earns £25,000+ a year. An income lower than this may struggle with getting a buy-to-let mortgage secured without talking to a mortgage advisor.
- A certain age limit is a criterion, as lenders typically sanction loans according to the age the borrower will be once their loan ends. The age limit is 70-75, meaning the borrower needs to be below 75 when their mortgage loan finishes.
There are also other differences between a conventional and a buy-to-let mortgage, and they are as follows:
- The fees are typically higher
- The interest rates are typically higher in a buy-to-let-mortgage
- The minimum deposit of a buy-to-let-mortgage is 25% of the property’s value. It can also vary between 20-40%.
- BTL mortgages can be purely interest-based, meaning the borrower merely has to pay the interest, rather than the repayment amount. However, at the end of the term, the borrower will have to pay the full amount.
Thus, picking and choosing what works out for which individual situation is important, as each element leans in favour of a differing need.