Borrowing money for a ‘buy to let’ investment is different to borrowing for your own home. The interest rate is usually higher in comparison and the deposit required is usually between 20% and 40% of the property’s value.
In addition to the LTV (Loan to Value) Ratio, most lenders will also set a minimum ‘rent cover’ which is generally set at 125% of the monthly mortgage repayments. This means that for a mortgage repayment of £500 you may need to demonstrate a rental income of £625 per month.
Whereas buy to let mortgages were once excluded from legislation relating to stress testing, this is changing and together with what many regard as punitive increases in SDLT (Stamp Duty Land Tax), exclusion from recent reductions in the rate of Capital Gains Tax and the phased elimination of Mortgage Interest Tax Relief, many aspiring Landlords are wise to reconsider their options.
Of course, cash buyers will not have to worry about Loan to Value ratios or the loss of mortgage interest relief. Perhaps remortgaging one’s own own and using the cash elsewhere is being considered by those with significant equity?
For more information, contact us on 01628 507477.
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