What you need to know about buy to let mortgages with an 80% LTV
Buy to let mortgages at 80% LTV
With fewer people being able to take that first step onto the housing ladder, the rental market has a constant demand. In addition to that, there is also a growing number of people who live in a location they like and then who work in the city during the week and so rent a small property while they are there. All of this means that it is perhaps one of the best times to start building up a property portfolio.
Don’t I need a 40% deposit?
Buy to let mortgages have changed a lot over the last few years, and one of those changes is that there are now buy to let mortgages available with much higher loan to value ratios that were available in the past. As long as you can demonstrate that the rent you receive will be at least 125% of your mortgage payments, which is usually done by consulting with estate agents in order to find out what similar properties are rented out for and also to establish the level of demand for the type of property you are planning to buy in the area you are planning to buy in. Therefore you can now find buy to let mortgages that only require a 20% deposit.
What are the interest rates like?
Buy to let mortgages have always traditionally had higher interest rates attached to them than residential mortgages, but even these have slowly reduced over the last few years. For an 80% loan to value ratio you can expect to pay between 4.5% and 5% on your mortgage if you opt for a two year fixed rate mortgage. The fees for these types of mortgage are very similar to those for residential mortgages with the average application fee being around £1000. You may also find that buy to let mortgages with higher loan to value ratios have more flexibility when it comes to making overpayments.
Length of fixed rate term
With indications that the Bank Base Rate could be set to start to rise again in 2018 this would be a good time to perhaps look at a longer term fixed rate mortgage that will keep your mortgage payments stable for five years rather than two. This way you will be able to ensure that you can make your mortgage payments with the rent that you have coming in without having to raise the rent.
Speak to the experts
Mortgage brokers have an indepth knowledge of the market
Taking on another property is not something you should do on a whim. Therefore in order to make sure that you are making your decision using the most up to date information you should speak to a mortgage broker who specialises in buy to let mortgages. They are likely to be aware of things that you are not as they work in the business and will have contacts and qualifications that will ensure that they are kept up to date with all of the latest changes in criteria.