Buy to Let Mortgages - What you need to know as a contractorAnother way for a contractor to expand their income is via a Buy to Let property. They can earn some extra monthly cash, and also obtain a capital investment.What deposit do I need?You would need at least 20%-25% deposit to obtain a Buy to Let mortgage, in comparison with a residential mortgage, that could be obtained on a minimum of a 5% deposit.How much could I borrow?Lending criteria differ from lender to lender with some not looking too much at your own income if you have a certain amount of potential rent coming your way from the new property.Top Tip: A general rule of thumb is some Lenders tend to expect your rental income for the property will be at least 125% of your monthly mortgage payment. E.g. If mortgage monthly payment £800, Anticipated Rental Income should be at least £1,000.What interest rates can I expect to pay?Interest rates are currently competitive however bear in mind a rate on a Buy to Let mortgage will tend to be a little bit higher for a similar loan to value with a residential mortgage product. What fees will a lender charge me?Lenders will usually charge a higher arrangement or product fee for a Buy to Let mortgage, the difference between various providers and individual products can also be quite substantial.For that reason, we search through our panel so that you are not paying more than you should and still getting a competitive mortgage rate.How long will the term of the mortgage be?Unlike residential funding which is usually limited to borrowing up to a certain age (usually retirement age), you can often secure a buy to let mortgage beyond your retirement age. This is because the lender will primarily focus on the rental income produced by the property when underwriting the loan, rather than income from your employment (although this too may be taken into account). This will vary considerably between different lenders. Note we can also obtain a Buy to Let on a Capital Repayment basis guaranteed to repay the debt, or an Interest Only basis, where you have a lower monthly payment.What is the difference between a Capital Repayment Mortgage and an Interest-Only Mortgage?Capital Repayment Mortgage - your monthly payment will cover the interest on the loan and gradually pay off the capital you have borrowed. By the end of the agreed term you will have paid off the loan, provided all repayments are made when they fallInterest-Only Mortgage - your monthly payments will only cover the interest on the loan. Your payments will not pay off any of the capital that you have borrowed. You must arrange an adequate Repayment Vehicle (i.e, savings plan or other form of investment) to pay off the loan at the end of the term. Please note that Contract Mortgages Ltd does not provide investment advice, and we would recommend that you seek advice from an independent financial adviser on such a repayment vehicle.What factors will affect me getting a Buy to Let mortgage?If you don't already own your own home, whether outright or with an outstanding mortgage, you may struggle to get a BTL mortgage.You must have a good credit record and not be stretched too much on your other borrowings such as your existing mortgage payments and credit cards.Investing in property can be risky, so you shouldn't take out a BTL mortgage if you can't afford to take that risk.Your next stepsWhether you are looking for your first Buy to Let mortgage or looking to expand your property portfolio, having discussed your circumstances with you, we could find the right deal for you from our panel of lenders.Get in contact today, phone 0800 211 8700 or fill in our online enquiry form for more information.YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
