What mortgages are available to property investors?

January 28, 2016 by Brendan

Landlords

Although buy-to-let mortgages are more expensive than a regular mortgage, they are necessary if you want to invest in property and become a landlord. Property investment has an element of risk attached, so consider carefully before making a decision.

There are some lending criteria which apply to most buy-to-let mortgages, which could affect you if you are considering applying. You should generally be a property owner already, whether you have a mortgage on the property or own it outright. Affordability will be taken into account, so you should have an excellent credit record and not have too many outstanding debts. Upper age limits will apply and all lenders will have their own criteria. Check with your CeMAP trained mortgage adviser when applying.

There are some differences between regular mortgages and buy-to-let products. The interest rates on a buy-to-let mortgage will usually be higher than a regular mortgage, although there may be some special rates available. The deposits for a buy-to-let mortgage are usually higher than a regular deposit, often starting at 25%, but in some cases reaching 40%. Buy-to-let mortgages are usually based on interest only, which means that you are required to pay off the capital in full at the end of the agreed term. You may also pay much higher arrangement fees than you would for a typical mortgage.

Obtain professional advice prior to making a decision to become a landlord, so that you minimise any financial risk. As the Chancellor has announced changes to Stamp Duty Land Tax and tax relief for landlords, becoming a landlord may not be a viable option for you.