Why Are Buy to Let Mortgages Difficult to Obtain?

Why Are Buy to Let Mortgages Difficult to Obtain?

Keywords: buy to let mortgages, bad credit mortgages

UK residents who want to have an additional income should consider letting a property. In certain regions in UK there is a high-demand for rentals. This makes buy to let mortgages quite attractive. These properties are available in various sizes and shapes; whether you are interested in a house, an apartment or something in between you can be sure to find it. As far as bad credit mortgages are concerned, these are a bit more difficult to obtain but not impossible.

What Is the Difference Between Buy to Let Mortgages and Residential Ones?

Individuals who would like to apply for a buy to let loan should know what it entails. To begin with, should you take out a loan for a property with the purpose of letting it, this property cannot be your permanent residence. This is an important aspect, one that you should keep in mind before you decide whether such loans are suitable for you or not.

Another aspect that makes buy to let mortgages different than normal ones is how the lender assesses affordability. To decide whether they approve a buy to let loan or not, lenders consider the rental potential of the property.

They have to make sure the rental income obtained by the borrower enables him to make the mortgage payments. Personal income is also factored by BTL lenders, but the deciding aspect for

them remains the rental income. Other noteworthy differences between buy to lets and residential mortgages are the interest rates and the deposit requirements.

How to Obtain Bad Credit Mortgages?

Bad credit is a problem that should be addressed before you apply for a mortgage but it is not the end of the world. If you have bad credit and you would like to take out a loan against your property, you should hire a skilled broker. There are things you can do to improve your credit history and a professional in this field can help you take the necessary actions.

Competent brokers make bad credit mortgages easier to obtain; they are at your disposal for guidance and information and you should not hesitate to resort to their services. When working with a broker, you increase the chances of getting the loan and securing a good deal. Although you will not qualify for the best offers as people with good credit do, at least you will be able to obtain a new loan with a reasonable interest rate.

What You Should Know about Buy to Let?

When it comes to buy to lets, there is no limit to the amount of money you can borrow. As long as you provide evidence that the rental income will help you make the monthly payments, you should not have any difficulty obtaining a buy to let. Most lenders require a rental income forecast and this has to be provided by an ARLA-regulated letting agent. Also, some financial institutions might ask for minimum personal income requirements.

The subject of buy to let mortgages is also discussed by Forbes, "Lenders require you to take out a buy-to-let mortgage to reflect certain additional risks that come with renting out a property – the main one being that you will be unable to pay the mortgage because your tenants default on the rent or you can’t find tenants and the property is empty for a period. "

What Are the Pros and Cons of Buy to Let? It is important to have a clear understanding of buy to let mortgages, to figure out whether you should proceed with such a loan or not. When it comes to advantages, you should be aware of the facts that buy to let offer:   

A long-term financial gain- a buy to let property is a sound investment in the long run; the value of the property is likely to increase over time and should you resell the property you will be able to make money.

The rental market in UK has potential- there is a growing demand for high-quality accommodation in UK and you should take advantage of that.

Tax benefits- you can recover some of the running costs of buy to let properties.

What Are the Risks of Bad Credit Mortgages?

As the name suggests, bad credit mortgages are available to people with bad credit. Some lenders are willing to work with borrowers that do not have a perfect credit score but they offer the former stricter terms and conditions.

This means that should you apply for a bad credit mortgage; your loan will have a higher interest rate than that of a person with good credit. The amount for the deposit required to obtain the loan will also be higher; lenders consider you a high risk and they will take the necessary precautions when they are willing to work with you.

What Are the Eligibility Requirements for Buy to Let? To see whether you qualify for a buy to let or not, you should consider the following:      

The minimum deposit requirements- you will need around 20-25% percent of the total value of the property so that you can obtain a buy to let loan. The more amount of money you have for the deposit, the better the interest rate will be.

The projected rental income and the personal minimum income requirements Credit history Age- to qualify for such a loan you have to be at least 21 and not older than 75 Your landlord experience- there are lenders that prefer to work with people with experience in this field, with individuals with a great track record.

Having your own residence- most financial institutions will not grant you such a loan if you do not have your own home.

What Other Factors Impact Buy to Let? When deciding whether to offer buy to let mortgages or not, institutions consider various aspects.

You have to show them proof that the property you would like to purchase is worth it and that it will attract tenants. Should you need help with this or with bad credit mortgages, you can always contact experienced brokers.