For Buy to Let investors, securing the right financing to purchase a property can be a time-consuming and tricky process – made trickier still if managing a large portfolio of mortgaged properties.
A mortgage broker can help you find the most suitable mortgage lenders and deals for your Buy to Let investment and can also help you submit your application and manage the entire application process, working as an intermediary between you and the lender.
Here, we look at the ways in which a broker can help Buy to Let investors.
Helping assess the right mortgage type for Buy to Let investors
To establish which will be the most suitable Buy to Let mortgage type for their clients, a mortgage broker will start by asking questions about your personal and financial circumstances. This information, along with an understanding of your Buy to Let objectives, will show them which lenders are likely to give you the most advantageous deals.
Questions will typically be based on:
- Your income – most lenders require minimum earnings of £25,000
- The value of your Buy to Let property
- Details of the property
- Your deposit
- The type of Buy to Let mortgage you’re considering
- Your credit history
Your broker will then search the market. With hundreds of potential Buy to Let mortgage lenders, each with their own variety of products, they’ll narrow down the most appropriate options to present to you, saving you valuable time.
Guiding investors through affordability assessments
Buy to Let loans and the total you can borrow are decided based on the level of rental income the property you’d like to purchase can achieve and generally don’t include your personal income.
Here is how it works:
Interest Cover Ratio (ICR)
Most Buy to Let mortgages are offered on an interest only basis. The ICR test subsequently plays a part in the assessment.
Lenders will typically expect your Buy to Let property’s rental income to achieve 125-145% of the mortgage repayments, as well as being comfortable that you’ll still be able to afford mortgage payments if the property is not being rented out. They’ll use a higher interest rate (often 2% higher than the actual rate or 5.5%) to make their calculations.
Top slicing
Some lenders will consider your personal income as well as the rental potential of the investment property. This is typically only an option for those with a substantial personal income.
Deposit
A deposit of 25% or above is usually required for a Buy to Let mortgage.
Buy to Let mortgage applications can be more complex than regular ones. A good broker can help you navigate lender requirements and complete the application.
