Buy-to-Let Mortgage

Mesh_2

Hi All,

I'm after my first buy-to-let mortgage. however I'm not sure how much I can borrow.
Can someone give me a rough guide (ie 3.5 x salary) that the banks use, so that I can figure out how much I can afford?

Or, better still is there a website that I can use to punch in figures and get some idea on monthly repayments?

Thanks in advance.

meanmachine_2

That ship's sailed, I'm afraid - unless you're acquiring the property at a tremendous discount of course (inherited, for example). If not you're better off putting your money into a high interest account.

You need to work out the rental yield on the property. BTL mortgages are lent out based on how much you think you can get in terms of rent. Nothing to do with salary. You also need to put down a sizeable deposit, no less than 25%. You can borrow against your residential property but with house prices on the slide, that would be madness (in my opinion, although many have done it).

You also have to factor in voids, and maintenance plus lettings fees. And be aware that over 1/3 of landlords wind up in court trying to get tenants evicted.

But good luck!

theGrinch

some lenders what some minimum salary assurance and others just rent cal. you can boroow up to 87% LTV, but 85% is usually doable depending on rent.

if you are prepared to hold for minimum 8 years then property is surely the best investment around.

indeed there are costs to being a landlord, but most of these as well as mortgage interest can be offset against rent for tax purposes

eurows

some lenders what some minimum salary assurance and others just rent cal. you can boroow up to 87% LTV, but 85% is usually doable depending on rent.

if you are prepared to hold for minimum 8 years then property is surely the best investment around.

indeed there are costs to being a landlord, but most of these as well as mortgage interest can be offset against rent for tax purposes

I have never heard such irresponsible advice. All roads lead to lower house prices which surely offset any gains in rent. Meanmachine is right you have missed the boat.

I suggest you read this

http://www.mortgagedown.com/mortgage-tips/Why-a-House-Price-Crash-is-GOOD-for-your-Wealth-20050523.html


The two groups most likely to suffer in a crash are:-

Who is left? Two more groups. The fourth group is the amateur landlord, the 'BTL newbie'. Sniffing the scent of easy money, this crowd jumped onto the buy-to-let gravy train far too late in the boom, or thru inexperience or downright lack of aptitude for the game bought at ludicrous overvaluations, meaning their 'investments' had to be subsidized, and HAD to appreciate in value in order to justify the cost. Allegedly, the pro landlords sold to this group, often utilizing the service of 'Become a Property Millionaire' type seminar companies to suck in the gullible and get them to sign on the dotted line as well as contribute a few thousand for the privilege!. Anyone who bought a 'spare' property within the last 2 or 3 years falls into this group, and will be hurting badly by now. A crash will most likely wipe them out as they face decades of subsidizing tenants just for the chance to get their money back, plus all the hassle that goes with being a landlord (leaky roofs, service charges etc etc etc).

The fifth and last group are the recent first time buyers who panicked and bought within the last 2 or 3 years despite the obvious housing bubble that had already formed. Whether thru fear or greed, they jumped on board the housing train just before it derailed, and they will also get badly hurt in the crash.

theGrinch

hmmmm....eurows, your hysterical ramblings add nothing to this thread. read the initial post and answer the question. if you are incapable of such a simple task, there must be much else you are incapable of, but I will not venture to those dark corners.

I am stating a fact, which you can not disapprove and which balances the thoughts of yourself and meanmachine. can you disapprove lenders offer 85% or 87% LTV BTL mortgages? Is holding property for a minimum of 8 years irresponsible advice as opposed to those that think its a short term gain? can you disapprove that a mortgage should be considered with the rental yield in mind?

The poster is mature enough to make their own decision and I am not offering advice although, I am quite happy to do a BTL as I know my strategy and you certainly dont. I do not care whether prices go up and down over next few years as I am here for many years.

the only irresponible one here is you with your perverse and angry views and dubious sources. there is something eating away at you.

no not all roads lead to lower house prices just as not all roads lead to higher prices. if your mentality is deficient for sensible argument then dont bother. I suggest you try to state a few facts if you want to be more credible and instead of churning tabloid headlines you read on the front of the daily mail or other red top you pleb.

meanmachine_2

The OP has to make their own mind up at the end of the day - once they've read up fully about the subject (both good and bad).

But it does seem like they are rather late to the party - by about 5 years, I'd say.

However, if they can get hold of a property at well below market value, then it's a do-able investment.

But gearing up with an 85% mortgage, is that really good advice? It sounds crazy to me, but maybe I'm just old fashioned.

To the Op I'd suggest they check out online mortgage checkers such as Charcol or moneyextra. But they MUST do their sums first.

If the rental yield isn't at least 5% then it's surely a bad investment, wouldn't you agree Grinch? And since BTL is an investment choice, not a lifestyle choice then yield must be taken into account.

The OP must also take into account the chance of their asset depreciating - a risk that you don't have if your money is in the bank.

ANECDOTAL: A flat opposite me is STILL up for let, three months after it went on the market, and 12 months after the owners first tried to sell it (without a single taker). Sounds to me like they're losing money - and fast. Again, a risk that BTLs bring.

Natelle_2

Mesh wrote:

Hi All,

I'm after my first buy-to-let mortgage. however I'm not sure how much I can borrow.
Can someone give me a rough guide (ie 3.5 x salary) that the banks use, so that I can figure out how much I can afford?

Or, better still is there a website that I can use to punch in figures and get some idea on monthly repayments?

Thanks in advance.

You might find information on these sites of value:
http://www.landlords.org.uk
http://www.landlordzone.co.uk
http://www.lml.co.uk

My advice to you is "MAKE SURE THE SUMS ADD UP".
Being a landlord is only profitable if you let your head rule rather than your heart.

theGrinch

heehee eurows...name calling doesnt add to an intelligent discussion. you are confusing me for someone who cares about your posts.

Regarding 7 thanks and as you are a newbie, you will not know that this system is about a month old while many of my posts date from 2004. again you need to build a stronger argument instead of venting hate.

MM...I agree if you can keep away from 85% LTV then better for it. All I am saying is that 85% LTV exists, just like 130% mortgages (utter utter folly). I also agree today you need to look harder and further a field for a viable BTL compared to 1998. Finally, 5% yield is too thin. I look for 10% minimum, though 8% plus is viable.

If you want to be a landlord then there will be good and bad days. you need to be prepared for both. but I still maintain that property is a viable pension if you are looking 20 or 30 years in the future. I would rather own and manage my pension than leave it to the likes of the faceless pension managers taking a cut.

the fundamentals are do your sums with the worse case scenerio. make sure rent covers interest by 1.3 multipler. make sure there is a tenant demand for what you are buying and only spend what you can afford to lose.

Mesh_2

Thank you all for your replies.
As a newbie to buy-to-let it is good to hear all view points ( however aggressive they are!).
From your comments and my own diligent research I will then decide if BTL is a viable form of income/investment for me!
I take it for granted and I'm sure/hope majority of Forum users acknowledge all posts are personal opinions and that no one can predict an accurate outcome of the future.

Can you help with another question?
I don't understand how to work out rent YIELD?
For Example: ( all figures are made up)
My BTL mortgage = £100000 over 25 years
My Monthly repayments = £400p.m
My rent = £500p.m

So is it possible to work out the rental Yield from these figures?

Natelle: Thank you for the websites, I haven't had a chance to look at them yet but will do soon.

Thanks again.

meanmachine_2

Glad some of the posts were useful to you.

I think the BTL brigade stir up a lot of emotions among people, particularly us FTBers who have been priced out of the property market of late due to "investors" who think that there is easy money to be made from the housing market (cf Dozie Millard).

As I say, you won't make money in today's market, unless you can access a property below market value.

This site has a few calculators on it:

http://www.bmsolutions.co.uk/products/btl/btlcalcs.asp

Pal

Mesh - what deposit are you putting down on the property?