Firstly, a big point to make from a brokers stand point is that buy to let mortgages are not regulated by the FCA (Financial Conduct Authority) in the same way that residential mortgage are.
This is because they are classed as a commercial mortgage, and in some respects you dont get the same protection taking out a BTL mortgage than you would if for example you wanted a regular mortgage to buy a new home or remortgage your existing property.
This means that it is much easier to become a buy to let mortgage advisor, and you dont have to deal or worry about issues around regulation and the FCA.
From a borrowers point of view the 2 main points of difference are:
1. Rates are more expensive. Buy to let mortgages are more expensive and interest rates, fees and charges are higher if you compared against a residential mortgage. This is because buy to let is deemed to be higher risk, and a commercial money making venture.
2. A larger deposit is required. The minimum deposit you’ll need on a buy to let property is 15% (85% LTV mortgage) while the same on a residential mortgage would be 5% on a 95% mortgage. This means lenders require more security when you take out a buy to let mortgage. It is worth noting that 85% generally is the highest LTV for buy to let, but the RBS and Natwest both have 90% LTV products for existing customers only!
A quick look at the major mortgage comparison websites online at the 85% mortgages for buy to let range and you’ll be able to see how interest rates have come down over the past 12 months and that there are now a few more lenders offering 85% LTV mortgages for buy to let to let property.
We have seen across the mortgage market new lenders and products coming to market and we’ve seen some of the lowest rates on fixed rate deals for a long time now.
Good news for low deposit investors
85% loan-to-value mortgages are popular with new investors or those who have a smaller deposit and less cash to invest in their property. It means newbie investors can get on the buy-to-let ladder with less cash or make the money they do have go further, perhaps to buy further properties or to use any spare money for costs such as finders fees, solicitors fee or modernisation and renovation work.
What mortgage lenders current offer 85% buy to let mortgages?
At a quick glance we can see the following lenders:
1. Kent Reliance
2. Birmingham Midshires
3. The RBS – Also offering a 90% LTV mortgage for existing customer
4. The Natwest (Part of the RBS) – Also offering a 90% LTV mortgage for existing customers
We have working with all the above lenders and have a good understanding their requirements with regards the applicant criteria, credit rating and rental requirements for each product. Each of the above mortgage providers are different in the way they assess applicants and have different rules about what they will and wont accept.
Mortgage lenders, banks and building societies have become more picky about there application process in recent years, which means it pays to get some advice on what the requirements are, and if your proposed BTL investment fits in with their criteria.
What are the rates?
Interest rates for all types of low deposit mortgage are high when compared to other LTV ratios such as the 70% and 75% deals. However, they do allow you to enter the market for less money, but you should expect to pay more in charges and higher rates for it.
Fixed rate 85% deals
The fixed rate products are available across the standard range of periods which are 2,3 and 5 years. The longer fixed rate deals are more expensive when compared to the 2 year product, however they do offer some security of fixed payments for those borrowers who look to know what there payments will be over the longer time period. Rates are around the 5.29% – 6.7% range depending on the exact deal you go for.
Where to go for advice or rates
If you want to take a look at the rates then shop online and use a comparison website where you can view the rates on offer to see which lenders are offeringf the lowest rates and fees. If you need advice on the best type of mortgage you need then please contact us.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT. MISSING PAYMENTS WILL HAVE SEVERE CONSEQUENCES AND MAY MAKE OBTAINING CREDIT MORE DIFFICULT IN THE FUTURE.