mortgage

Usually, buyers have to apply for a mortgage from banks or lenders when you buy a property. However, when the property is purchased as an investment, i.e. if the property is purchased to earn rental income, the buyer needs a buy to let mortgage from their bank or lender. Before we get started on the future of buy to let mortgages, let’s talk about what buy to let mortgages are and how they are different from regular mortgages. First, let’s start with the most important question: what should struggling landlords do? 

What should landlords who are struggling to repay their mortgage do?

As for the landlords who are currently struggling to pay their bills, remortgaging is always an option. All you need to do is find the best buy to let remortgage, which will help you save money. A remortgage will allow you to take out another buy to let mortgage, which will either be at a lower rate of interest or for a more extended period.

What is the difference between regular mortgages and buy to let mortgages?

For one, buy to let mortgages are only given to individuals looking to purchase a property they will put on rent. Secondly, the rate of interest for a buy to let mortgage is much higher. However, a buyer only needs to pay the monthly interest during the mortgage period and needs to pay the loan amount in full once the mortgage period ends. Lastly, the buyer must put down at least 25 per cent of the property’s total value as a downpayment. However, this value can be anything between 25 per cent to 40 per cent, depending on the lender and the value of the property.

What is the criteria for buy to let mortgages?

As explained by some of the best mortgage brokers in the UK, in order to get a buy to let mortgages, you need to be eligible according to the lenders’ policy. You should be over 25 years old, and you cannot be older than 80 years of age when your mortgage period ends. You cannot be a first-time buyer, and you need to already own a property in the UK, which is under your name. The property that you are buying can only be used for rental purposes, and the property must be self-funding, i.e. the monthly rent is more than the monthly mortgage payment. Also, the value of the property needs to be over £50,000. If you want to know more about eligibility, get in touch with the best online mortgage brokers london.

What is the future of buy to let mortgages?

Due to the pandemic, landlords have seen a sudden decline in the number of buy to let mortgages available in the market. Since March 2020, the number of buy to let mortgages dropped by a whopping 35 per cent. Landlords who were borrowing at 65 per cent to 75 per cent loan to value ratio were the least hit from the mortgage cuts, while landlords who were borrowing at 100 per cent loan to value ratio suffered the most. Landlords who were borrowing at 60 per cent loan to value seemed to reap the benefits of the limited mortgage deals available.

At the end of March 2020, the average fixed rate of a two year buy to let mortgage was 2.9 percent which went up to 3.1 per cent by October 2020. As for five year fixed deals, the rate went up from 3.39 per cent to 3.56 percent. However, we need to keep in mind that the buy to let market played a significant role in helping the UK real estate market recover during the pandemic. As the demand for buy to let properties increases, so will the number of available buy to let mortgages.