Buy-To-Let Mortgage Rates
There are more than 200,000 amateur landlords in the UK and although the market has slowed because of rising house prices and interest rates, those with sufficiently large deposits 'typically 20%-25%' can still earn a respectable yield from the rental income.Deposits generally need to be larger in today?s market otherwise the rent will not usually be sufficient to cover the mortgage interest and satisfy the lender?s requirements.
Investment mortgages used to be 1%-2% more expensive than standard residential deals but since the inception of specialist buy-to-let products the rates have plummeted. The best buy-to-let deals are now cheaper than many ordinary residential loans.
Lenders generally demand that the rental yield being able to cover the mortgage interest, plus approximately 20% as a safety buffer for both you and the lender. However, some lenders have relaxed this criterea and now only insist that the rental income will cover 100% of the mortgage interest, although to qualify you will generally need a larger deposit. Affordability is not worked out on a capital and repayment basis – the sums are done on an interest-only basis. This means that it is up to you whether or not you make any provision to pay off the mortgage capital.
Technically, all you need is a deposit of as little as 15%-25% and, as long as the potential rent is deemed to be sufficient, you can buy your investment property.
However, buying-to-let in London should not be regarded as a short-term bet but should be entered into with a medium to long-term view.
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