It is probably no secret that property tends to be a strong asset class and a good option for a long-term investment and when it comes to arranging a mortgage for your purchase, a broker tends to always be the best route to choose.
So, how does the process work and how does it differ from a more standard residential mortgage? Our team of experts regularly assists our clients with buy-to-let mortgages and are therefore very well placed to provide advice and guidance.
We have outlined how the buy-to-let process works in the four steps below:
- Mortgage Illustration
Unlike a residential mortgage, a buy-to-let mortgage does not tend to start with an agreement in principle. Rather, you will receive an initial illustration that outlines the mortgage you could be eligible for.
Your broker will simply need information such as the property value, expected rental income, size of deposit and confirmation of your income. Unlike a standard residential mortgage, your income is less important and generally needs to be at least £25k per year to qualify.
A buy-to-let mortgage does require a larger deposit than a residential mortgage, however, so you would need to find at least 20% of the property value, however with a 25% deposit or more you are likely to get a better mortgage rate.
Generally, buy-to-let investors prefer to have an interest-only mortgage however you also have the option of choosing a repayment mortgage if you wish.
- Valuation And Survey
After you have had an offer accepted and you have chosen the right mortgage product, the process is relatively similar to a standard residential mortgage, so the next step is for your broker to submit a full application.
Once submitted, your chosen lender will carry out a valuation and survey of the property. This will make sure that the property is worth what you are paying for it and structurally secure in order that their loan is safe.
In addition, the valuation will confirm the rental valuation which will guide how much you can borrow. For example, if the rental valuation is lower than you initially thought then you may not be able to borrow as much as you initially had hoped.
- Mortgage Offer
Once all the checks and paperwork has been completed, your lender will issue a formal mortgage offer. This will be sent to your solicitor, and it is worth letting the agent know that the offer has been received.
Generally, a buy-to-let mortgage offer will last for three months and can be extended at the discretion of the lender.
- Final Steps
The final steps for a buy-to-let mortgage are much the same as a standard residential mortgage.
Therefore, when your sale is ready to complete your conveyancing solicitor will use the money received from the mortgage lender along with your deposit to send the seller’s solicitor, and as soon as funds are received by the seller’s solicitor, you will be able to collect your keys!
We regularly work with buy-to-let investors, if you are purchasing a property and have any questions, then we will be more than happy to help where we can. You can either call us on 01322 553282 or contact us online.