Know your mortgage options if you are a first time landlord
Mortgage options for first time landlords
With the economic climate still strongly supporting the rental market you might be thinking about getting in on the action as a landlord. The rental market is continuing to grow due to the difficulty people are having getting onto the housing ladder and also as the trend for owning a property and working in different locations increases. Before you jump into attempting to buy a buy to let property, there are a few things you will need to know and do in order to give yourself a greater chance of not only getting your mortgage application accepted, but also to make the process as smooth as possible.
What is a first time landlord?
This might seem like a strange question to need to answer, but actually the response is not a simple as you might think. Part of the answer is the obvious group of people who have never owned a buy to let before and so this is their very first time being a landlord. However you should also be aware that you will also be classed as a first time landlord if you have not owned and let a property within the previous six months, so if you are considering changing your letting property you should be aware that if you sell one and end up taking more than six months to find your new property you will then go back to being a first time landlord.
What mortgage options are there for first time landlords?
As a first time landlord you will find that you do not have access to the entire market, but there are still plenty of products available for first time landlords. The exact mortgage products you will have available to you will mostly depend on the amount of deposit you have available, but most will also only be available to first time landlords if you also own your own home, either with or without a mortgage on it. The strength of the rental market means that buy to let mortgages have gradually expanded to include mortgage options for people with smaller deposits.
There was a time when you would need at least a 25% deposit in order to be able to qualify for a buy to let mortgage, but you can potentially get a buy to let mortgage now with as little as a 15% deposit. The 85% loan to value mortgages will not provide you with the lowest interest rates available, but there are options for two, three or five year fixed rate deals, which could still provide you with a good mortgage deal as the Bank of England base rate is predicted to begin to rise within the next year or so. Having a fixed rate deal that is slightly higher than the best interest rates on the market may seem like a poorer option, but if you consider that with a base rate rise any other deal is going to see an increase in interest rates, a longer term fixed rate deal can actually provide you with a number of factors including stability of your mortgage payments along with protection from rises in interest rates along the way. The major benefit from a five year deal is that you can potentially grow your savings to then remortgage onto a deal with a larger deposit. Not only that, if you choose a five year fixed rate mortgage you will only have to pay one lot of arrangement fees, which can be significant if you go for shorter term deals and have to remortgage more regularly.
How to find the best deal for you
Mortgages are not the easiest things to compare as there is a lot more to comparisons than just looking at the interest rates that each one attracts. There are also arrangement fees, length of fixed term and the size of your deposit to take into account. Getting an accurate comparison on your own takes times and effort, so you can take the hassle out of mortgage comparisons by going to a specialist buy-to-let mortgage broker. They can provide you with all of the options available to you.
