Help - Buy to let mortgage advice

[Deborah Wright]

Hi All,

Can anyone advise how a buy to let mortgage actually works. Is the minimum desposit required 15%? How does the process work. When you have one buy to let mortgage, how do you go about getting another? I am lead to believe that it is connected to a release of equity. In what, your own property or your first BTL? I would appreciate some advice. Obviously I would like to own more than one investment property. I have an appointment later this week with a financial adviser. However I would appreciate some tips before I attend, just so I don't look a total idiot.

Cheers

[Tweedle Dum]

A15% deposit would be about normal for a BTL property but the mortgage will also be judged on the amount of rent the property would achieve. Most lenders insist on the rent being equal to approx 125%/130% of the interest payable. i.e. if the monthly interest on the loan is 100 quid then the rent needs to be at least 125 quid. As for buying a second property it's exactly the same unless you are asking how you fund the deposit.

[caroline7758]

Don't want to hijack your thread, Deborah, but in relation to the rental income being at least 130% of the interest paid (that's what our terms state), in what circumstances would the lender check up on this? I just realised today that, due to the tenant not paying for 5 months, we have probably not met this criteria, even though all our payments are up to date!:eek:

[Ericthelobster]

Don't want to hijack your thread, Deborah, but in relation to the rental income being at least 130% of the interest paid (that's what our terms state), in what circumstances would the lender check up on this?They'll never 'check up' on an existing mortgage - what would be the point? All they are concerned about is that you pay them the mortage payment each month; if you don't then they'll reposess the property. It's entirely your problem whether the tenant happens to be paying enough rent to cover your outgoings.

The time when the 130% (or whatever figure) comes into play is when you are trying to convince the lender to give you a mortgage in the first place. You will typically need to state on your application form how much you anticipate being able to let the property for (and of course, you'd better be sure it meets their criteria or don't bother wasting your time). The lender will then ask the surveyor who subsequently values the property whether your figures stack up.

[caroline7758]

Thanks, Eric, that makes sense to me, but in my terms & conditions it states that "the Mortgage Debt will become immediately due and payable on written demand by us...if...rental income received during any 12 month period is less than 130% of interest charged during the same period" & goes on to say they have the right to appoint a surveyor to get this information as required.
As you say, I don't see that it matters as long as they are getting their money!

[Deborah Wright]

A15% deposit would be about normal for a BTL property but the mortgage will also be judged on the amount of rent the property would achieve. Most lenders insist on the rent being equal to approx 125%/130% of the interest payable. i.e. if the monthly interest on the loan is 100 quid then the rent needs to be at least 125 quid. As for buying a second property it's exactly the same unless you are asking how you fund the deposit.

Hi,

Thanks for the reply. Yes one of the grey areas for me is once you have purchased your first BTL, how do you go about funding the deposit on the 2nd one. Do you constantly have to find 15% deposit in cash every time?

[RichieP]

No. What most people do is remortgage their current BTL property to raise the 15% on the next property. Obviously, this means you have to wait a while until it goes up in value.

[susan 2]

Deborah - You can either remortgage your btl property if it has enough equity in it, or if your current house also has equity then use that. I bought my first btl with a bankers loan (1985 -no btl's) then remortgaged our home two years later for £37000 and put down £11000 each on three more properties. Back then we had to put down 25% deposit, and the interest rate was 14.5%!! However the properties only cost between £29,000 to £35,000 As others have stated a mortgage company will not enquire into your details unless you start missing payments. There are plenty of books about mortgages and letting and it really is worth doing some homework. Best of luck.

[Deborah Wright]

Thanks for the advice all.

Have just made an offer on my first BTL and its been accepted. Fingers crossed everything should proceed well. Have sorted a mortgage and deposit with a financial advisor last night. The couple selling the property have only been there around two years. They are purchasing new furniture for their new place and have asked if I would be interested in making an offer for the existing furniture in the property. I would like to add it is all new leather sofa's, trendy wooden furniture. All in excellent condition. I am not sure if I should let out my first venture, furnished or not. I need to check but the sofa's should comply to fire regulations.

I would appreciate some feed back on your findings as to whether a property let's better furnished or not. It is in close proximity to a hospital and University. The market I am trying to target is Professional's not students. Any suggestion's?

:)

[poopscoop]

If you are tied in with your current mortgage, can you release the equity with a 'further loan/home loan' or would this count against you when applying for a BTL mortgage?