Questions to Ask When Choosing a Buy To Let Mortgage Lender
Many people take out mortgages on a buy to let basis. This is where you take out a mortgage on a property and then let it out to tenants, so you effectively act as the landlord. This makes buy to let mortgages slightly different to regular mortgages so you need to be careful when you are choosing one. This guide takes you through some of the key questions you need to ask when choosing a buy to let mortgage lender.
How big does my deposit need to be?
Often, buy to let lenders like you to have a larger deposit than other lenders in order to secure the property in the event of your tenants not keeping up their financial commitments with you. This means that you are likely to need at least a 15% deposit and possibly a lot more, depending on the lender, the market at the time, the type of mortgage and your financial status.
What financial arrangements do I need to make?
Buy to let mortgage lenders – as with any mortgage lenders – like to know that you will definitely be able to meet your mortgage payments and so it’s likely that they will want to know what financial arrangements you have in place before giving you the loan. If you are unsure of what you will need, it’s a good idea to ask them for their specific requirements so you can put plans into practice, as requirements can differ between lenders. As most of your mortgage money is likely to come from the rent you receive, most buy to let lenders like to know that you have a rent income that’s worth at least 125% of your monthly mortgage payments.
Is the mortgage fixed rate or variable?
As with any mortgage, when deciding which the best buy to let mortgages are, you need to know what kind of loan it is. This means that you should ask them whether the interest you will be paying is charged on a fixed rate or variable basis. If you need to know exactly how much you will be paying each month, then it can be a good idea to try and go for a fixed rate mortgage as this will avoid any financial surprises. If, however, you can take a chance on a variable mortgage, then this is a good thing to do as it means your interest rate can go down as well as up.
What if something happens and I can’t make my payments?
One of the reasons the best buy to let mortgage lenders want to know about your financial arrangements and require such large deposits is to cover you in case you can’t meet future payments. You should, however, always ask what procedures are in place if you find yourself in difficulty and can’t make your payments. For example, if your tenants move out before the end of their contract or fail to pay you, what does the lender recommend you do in the circumstances?
As long as you are sensible and know what you’re doing, you shouldn’t find it too difficult to choose the best buy to let mortgage for your needs. Just keep these key points in mind so you can always ask them for more detail if you need it.
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