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buy to let mortgages

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hi all,

I was looking for some advice on buy to let, my better half and I are considering this but really know very little.

Im particularly interested in

how much of a deposit is normally needed?
What borrowing formula would banks use to deterimine whether to give you it or not.
Id prefer to have a repayment mortgage but realise that financillay this could be difficult, other than the commitments would there be other considerations.
Finally, Im looking for a longer term investment ie having this rather than an isa, would this be senseble?

Hope this makes sense

Comments

  • dunstonh
    dunstonh Posts: 119,645 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Finally, Im looking for a longer term investment ie having this rather than an isa, would this be senseble?

    It's riskier than having a unit trust ISA and current timing may not be great but if you accept the high risk nature of borrowing to invest and you think that the capital growth will be good over the years (as annual income wont be in the short to medium term) and you can limit any potential capital gains tax and you can pick up a property with decent potential then fair enough it may come right. Only time will tell.

    5-8 years ago was the time to do it to make real money. Now you need to really know what you are doing in this area to pick the right property and make money.

    I wouldnt do a buy to let now and those clients I have that do transact in this area are being much more choosy with their properties and some are selling up.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • mshaw77
    mshaw77 Posts: 14 Forumite
    Hi,

    A buy to let mortgage usually requires a 15% deposit although there are a few companies offering with a lesser deposit but their rates are much higher. Most lenders prefer you to have your own property and an income of £20000 but some are more flexible.
    The usual criteria for a buy to let mortgage is that the rental payments cover between 100% and 125% of the monthly interest only payments calculated usually at the lenders standard variable rate.
    With regards to it being a better form of investment than an Isa, that depends on your attitude to risk. With a mini cash isa there are minimal risks. With a property you always have to take into account possible challenges with tenants, the property itself, and potentially the whole housing market as a whole.

    I hope this helps.
    Michelle Shaw
    MLH Mortgage Consultancy
    dprovan wrote:
    hi all,

    I was looking for some advice on buy to let, my better half and I are considering this but really know very little.

    Im particularly interested in

    how much of a deposit is normally needed?
    What borrowing formula would banks use to deterimine whether to give you it or not.
    Id prefer to have a repayment mortgage but realise that financillay this could be difficult, other than the commitments would there be other considerations.
    Finally, Im looking for a longer term investment ie having this rather than an isa, would this be senseble?

    Hope this makes sense
  • dprovan
    dprovan Posts: 347 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    thanks,

    Michelle, when you say most mortgage companies look for you to have your own property plus an income of £20000, can I check does this mean they expect you to own your own property outright????

    We have a combined slary of 65k however our current mortgage is not far off the max we'd be allowed to borrow, however we know we can comfortably manage this as we have no other debts etc...

    thanks in advance.....
  • mshaw77
    mshaw77 Posts: 14 Forumite
    No You don't need to own you current property outright as long as you are a homeowner!

    Then you should have relatively no problem with income etc, the only issue nowadays is the rent and the higher interest rates.
    Michelle

    Michelle, when you say most mortgage companies look for you to have your own property plus an income of £20000, can I check does this mean they expect you to own your own property outright????

    We have a combined slary of 65k however our current mortgage is not far off the max we'd be allowed to borrow, however we know we can comfortably manage this as we have no other debts etc...

    thanks in advance.....[/quote]
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