Our buoyant rental market and government financial encouragement in the form of the Funding for Lending scheme means that it is relatively easy to get a buy-to-let mortgage now. Many lenders have introduced new buy-to-let products in the last few months, and many have dropped their rates on existing products.
This doesn’t mean that buy-to-let is straightforward. While getting a mortgage is easier now than it has been for a few years, lending has not recovered to pre-crash levels. You will still need a hefty deposit and a good credit record for banks to even think about lending to you. To get the best rates, you’ll need a deposit of 40% or more, although mortgages are available with a more accessible 20% deposit. Those with 40% deposits should be able to find a mortgage with an initial rate of 2-2.5%. Those with a lower deposit can expect rates up to 5%.
Which mortgage?
How can you decide which mortgage to choose, from a list of products with very similar rates? And does it make a difference which kind of lender you choose – from high street banks and building societies, to internet based and specialist lenders?
As with anything, finding the right mortgage depends on shopping around. Don’t just walk into your nearest bank and take the first deal you’re offered. Check small print carefully to see what hidden fees and charges might be lurking below the headline rates. Will you pay hefty fees if you want to repay your mortgage early? Will you get a free valuation, or have to pay? Is the arrangement fee higher than other lenders? What looks like a great deal sometimes starts looking less great once you scratch the surface.
Whether to use a high street or specialist lender is partly a matter of personal choice. There is some comfort in knowing you can just pop into your local branch if you need to discuss your mortgage. However, specialist buy-to-let lenders may have greater expertise, and offer a wider range of products. If you have particular needs or think you may have problems getting a mortgage, they could be the place the head. It can be useful to go through a mortgage broker, though some will charge fees, and others will work on commission, meaning they may not be entirely impartial.
Letting on a standard mortgage
If you already own a property on a standard mortgage and want to let it, you may be able to do so without changing to a buy-to-let mortgage. You must speak to your lender before you let though, as there may be some hefty charges to pay if you let without permission and they find out. You will also need to check the terms of your insurance – you will usually need specialist landlords insurance, even if you only want to let temporarily.