How Much Deposit Do You Need For A Buy To Let Mortgage
Truth be told, qualifying for a buy-to-let mortgage is going to be a bit difficult if you do not already own a home. It doesn’t quite matter whether the home is outrightly owned or through another outstanding mortgage. What lenders need is proof that you can sustain owning a home and that you have the capacity and discipline needed to pay off a loan.
Obviously, you need to have an excellent credit record. You cannot be overstretched on your other loan commitments and it is often best if you earn much more than £25,000 every year.
How old do have to be to qualify for a buy-to-let mortgage?
Most lenders have their own preset age limits. Some are willing to stretch it out as far as 75. This means that the oldest you can be when you finish paying off your mortgage is 75. Anybody above legal age limit who qualifies can apply for a buy-to-let mortgage. But your period will be calculated based on how old you are and that 75 limit. For example, if you are 50 when you apply, then you can only apply for a 25-year mortgage, which means you will be 75 when you finish it off.
How much deposit do you need for a buy to let mortgage?
Well, this more often than not depends on who you are borrowing the money from and what their terms and conditions are for that particular loan. It is quite possible to find buy-to-let loans that will let you apply with as little as 15% deposit. These, however, come with very strict and rigid terms that tend to be quite expensive in the end.
Your typically buy-to-let mortgage will come with a minimum deposit of about 25% of the property value. Most lenders range between a minimum deposit 20-25% of the property value. This figure, however, as mentioned earlier, tends to fluctuate from lender to lender and it is not unheard of to find lenders who require a minimum deposit of 40% of the property value.
Many of these mortgages are interest only. What this means is that you pay off the interest every month and at the end of your term you have to repay the full capital. You need to realise that most BTL mortgages are not FCA regulated and as such, you may not get the same level of fairness that you would get when borrowing from a Financial Conduct Authority regulated lender.
Another alternative for those who don’t have the 20%-25% deposit handy is to negotiate a flexible payment plan with the seller; like spreading the deposit payment in one to two years rather than pay it lump sum. This gives you a chance to slowly build up to the required deposit for the mortgage in a more manageable way.
This type of payment strategy has been popularised by investors like Rick Otton, Reena Malra and Simon Zutshi, among others. Be sure to have a solicitor present when to help draft a contract that protects the interest of both parties.
What is the maximum amount you can borrow for your BTL mortgage?
This figure is directly linked to just how much rental income you can realistically generate. Most lenders only allow you to borrow a maximum of 25-30% above that projected rental figure. You can best find out this figure by checking the local rental charges for similar properties within the target area. Or you could talk to a letting agent as well as your intended lender to know the exact amount of money you can borrow as well as the terms that come with that mortgage.