buy to let mortgage criteria

heytoki

Hello,

I have 60k that i would like to invest and i have been thinking to buy a property and let it out.

Is there any difference in the criteia which follow the lenders concering first buyers and buy to let?

i.e. For first buyers, you could get up to 4 or 4.5 times and you will be asked about your expenses etc.

Is it the same criteria for buy to let?

Thanks

amnblog

Yes there are major differences.

Engage a mortgage broker to help you with what is an investment decision.

caprikid1

A mortgage and protection broker cannot give advice on investments. You really need a broker who can advise through the whole spectrum of possible investments.

BTL is also a non regulated mortgage so redress can be very limited if you make misakes.

There are too many after dinner conversation "What you don't have a BTL ?" Its not for everyone.

heytoki

caprikid1 wrote: »

BTL is also a non regulated mortgage so redress can be very limited if you make misakes.
There are too many after dinner conversation "What you don't have a BTL ?" Its not for everyone.

What are the mistakes you mean? Once you get the mortgage? or in the process? or if it can be a bad investment?

Also, you mentioned that is not for every one. Could you be more explicit?

thanks

caprikid1

There are legal responsibilities in terms of contracts, gas and electrical safety.

Property prices are quite high so capital gains could be minimal.

Mortgage costs WILL rise as interest rates can change.

Can you afford to pay the mortgage for 3 months if the tenants don't pay ? Can then afford to pay for the repairs after if the property is damaged ? (New Bathroom, Kitchen , Boiler ?).

Are you happy to have people calling you up for petty issues.

You need someone who can show you a wide range of investment opportunities.

ACG

BTL mortgages are not based on your income... although some lenders insist on you having an income.

It is based on the property being able to support itself. This is usually done by the rent needing to be 125% of the mortgage amount based on interest only at a rate of around 6%.

As has been said, being a landlord is not a case of owning it and watching the rent roll in. Letting agents tend to be useless and if you have a tenant who is a pain in the .... you might find you regretting doing it.

I used to be a landlord and had a woman growing cannabis in the basement, she drilled a 6inch hole drilled through the wall for ventilation.

Next tenant moved in and burnt the carpet, he denied it was him until I shown him the receipt showing it had been fitted the day before he moved in.
He also locked himself out 3 times in a month meaning I had to go down there... funnily enough he stopped doing it once I made him walk to my house in his PJs :-)

Dont get me wrong I was earning decent money from it, but there was work involved. Peoples versions of emergencies also seem to vary massively from mine - meaning phone calls at 8-9 or 10pm at night for pointless things that clearly can not be fixed until the next day... dripping tap for instance - and I do mean dripping, not leaking/flooding the house/street.

caprikid1

"It is based on the property being able to support itself. This is usually done by the rent needing to be 125% of the mortgage amount based on interest only at a rate of around 6%."

The problem is in reality many people will remortage / borrow additional funds from other places so often the BTL does not pay for itself.

ACG

You need to work out whether the rent would pass that calculation. If it does not, then you are going to struggle to get a mortgage on it.

If it does then thats a major hurdle overcome.

If the property can not pay for itself on an interest only basis on that calculation then I think you are possibly looking at the wrong properties.

vw100

Some BTL lenders don't lend if you don't have residential mortgage already.

kingstreet

vw100 wrote: »

Some BTL lenders don't lend if you don't have residential mortgage already.

... or own their own home, with or without a mortgage.

heytoki

Thank you all for your replies,

Actually i was looking for the lenders criteria rather than the negatives that come with renting out.

If you have bad tenants, or the boiler breaks down, i believe that is just a matter of luck. Otherwise, nobody would do it.

Basically, my idea was, put 60k down on a property, rent it out for two years and during this time save more money to pay off part of the debt and move into the property.

Currently i am renting and i pay an insignificant amount per month, so it allows me to save a lot of money each month. Also i have a full time job.

Initally, my idea was to buy a property to live in, but some of the flats i put an offer on failed. Also i realized about the expenses i would have had to cop with.