Buying a property and then renting it out provides an income, which will usually increase over the years, and gives the potential for capital growth.
An ideal situation would be where the rental income covers the buy-to-let mortgage repayments and maintenance costs and then when the mortgage has been paid off there remains a good income and a capital asset.
However, this depends on a number of factors such as the level of the rent and the amount needed for maintenance and other costs. Additionally, there may be periods when no rent is received and capital appreciation is not guaranteed.
Nevertheless, buy-to-let arrangements can be good investments in the right circumstances.
When assessing the income required for the maximum amount of loan, some lenders will base this on the potential amount of the rental income rather than the borrower’s personal income. A typical approach is that the rental income should be 125% of the mortgage repayments, although recent changes being phased in relating to tax-relief on mortgage interest mean that for higher and additional rate tax-payers the requirement is often 140%. Other lenders require a borrower to have a minimum level of other income.
In addition to raising finance for the purchase of buy-to-let properties, we can arrange 2nd and 3rd charges on currently owned buy-to-let properties as well as completely refinancing existing arrangements.
If a buy-to-let property requires renovation before a mortgage can be obtained, in most cases we can arrange a bridging loan to purchase and renovate the property and then subsequently replace it with a longer-term mortgage.