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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Best mortgage for new landlord
My husband has recently come into an inheritance which we would like to invest in a buy-to-let property. This is our first ever go at being landlords so we are a bit nervous about the process. We have many questions but wondered whether you could help us with one – what is the best mortgage for new buy-to-let landlords? Is it best to get a short-term fixed rate in case it doesn’t work out and we want to sell? Are there any lenders who specialise in first-time landlords? We have £90,000 to invest and we are looking at houses valued at £240k to £280k in our area.
Answer
Ultimately only you can decide which type of buy to let mortgage might work best for you. All we, or any other adviser can do, is lay out your options clearly to help you decide. Before you get to the mortgage you must do lots and lots of research to ensure that you are comfortable with taking on such a commitment and responsibility.
As the tax and financial implications for landlords are more complicated these days, you’ll also need to talk to a tax specialist who will help you understand whether you should be borrowing personally or via a limited company. Lots of lenders have products for first-time landlords but the term you choose will largely depend upon your appetite for risk. A shorter term will usually make it easier and cheaper to exit the mortgage but it will also make you more vulnerable to near future rate rises. Do get in touch if you would like to discuss your options in greater detail.
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Question
Are there opportunities for first-time buyers?
I am nearly 30 and live at home with my parents, where I have been saving up a deposit for my first home. Although I have been hoping to buy a home to live in I am starting to wonder whether it might be a better idea to purchase a buy-to-let so I can actually make some money through rent and save money on bills etc to put towards a bigger deposit five years down the line. Can I get a buy-to-let in my situation and, if so, what do I need to do? I have saved up a deposit of £18,000 and am looking at properties worth £150,000. My salary is £32,000 and I live in Northamptonshire.
Answer
The most you would be able to borrow would be 80% of the purchase price which means you should be looking at properties in the region of £90,000. As you don’t own any property, a lender will assess your eligibility based on your income as well as the rent.
Remember there are lots of other costs to consider in addition to the mortgage, so you’ll have to do your sums very carefully to work out whether investing in buy to let will generate enough surplus in the early stages to allow you to “make money”. Do get in touch if you would like to chat through the options in greater detail.
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Question
More than one borrower
My brother and I have decided to invest the money left to us by our father in a buy-to-let. Is it possible to have two of us on the mortgage agreement and, if so, is there anything we need to consider? I am a homeowner, with a mortgage, but my brother is not. We both earn more than £25,000 – which I believe is the minimum income for buy-to-let. Thank you.
Answer
It’s very common for there to be more than one person on a mortgage contract and many lenders will allow two to four applicants. As you are already a home-owner, you have to pay the stamp duty at the higher rate. Also, lenders will want to feel comfortable that you have no plans to live in the property yourself. And of course, you’ll have to carry out lots of research before you start your journey into buy to let. Do get in touch if you’d like to discuss this in greater detail.
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Question
Repaying at end of term
I have several buy-to-let properties and recently I received notification from my lender on one of these properties that the term had ended and I had to pay the capital. It turns out I had – without realising – signed a ten-year term. I didn’t even realise it was possible to have such a term! I am now unsure of my options. Would another lender take this on as a new buy-to-let or do I need to ring the lender and renegotiate?
Answer
It is possible to have a mortgage term as little as five years! If you haven’t done so already, contact your current lender to see if renegotiation is possible, this isn’t always an option if the mortgage term has already expired.
Other lenders will be happy to take this on as long as you and the property fit their criteria and the rental supports the repayment. Speaking to a mortgage broker will be your quickest way to find a lender who takes a view at these remortgages, so do get in touch if you would like us to negotiate on your behalf.
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