What to expect from buy to let variable rate mortgages
If you are thinking about buying a property in order to let it out seeing as it is still incredibly difficult for first time buyers to get onto the housing ladder and so there is a very strong rental market out there, then you will have to negotiate your way through the various types of buy to let mortgages available in order to find the right one for you.
Things you need to know about a buy to let variable rate mortgage
In general you will end up paying around 1% or 2% more for a buy to let variable rate mortgage than you will for a standard residential mortgage. You will find that you will only get the best rates when you have a deposit of at least 35% of the property value, although some lenders require 40% in order to offer you the best buy to let mortgages available. If you have this size of deposit you may also find that some of the restrictions of other mortgages are removed, such as early repayment fees. The application fees can also be a little lower than for mortgages that only require smaller deposits.
The application fee
The absolute lowest application fee you will pay will be around £1000, however the vast majority of mortgage deals with lower interest rates will have around a £2000 application fee associated with them. Other mortgage products from lenders who may potentially take on a higher level of risk offer not only higher interest rates, but also they use a percentage of the loan amount as the application fee, so the large the loan you require, the more you will pay to take out the mortgage.
Other limitations that may be applied
Depending on your mortgage lender, you may find that you have certain conditions placed on the rental of your property. Firstly, getting your mortgage will depend on you being able to demonstrate that you will be able to charge at least 125% of the mortgage payments you will be making. However it would be unwise to set rent at the minimum level as this means you would have to immediately pass on any interest rises to your tenants. You may also be restricted to particular types and length of tenancy agreement and also who you let your property out to, for example you may not be able to let to a group of unconnected individuals.
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