Finding an Interest Only Buy to Let Mortgage for Refurbishments
One popular investment route is to purchase residential, commercial or semi-commercial properties. Once refurbished and modernised, the value of an investment can increase significantly.
Long-term financing options are available through buy to let mortgages, and rely on several criteria such as:
- Your business plan
- The cost of the investment
- What sort of property you wish to buy
- How experienced an investor you are
- The cost of the refurbishment
- Anticipated revenue rental streams
- The LTV you want to borrow at
Now, buy to let mortgages are almost always on an interest-only basis.
You can find repayment buy to let mortgages, but that's very rare and would only work in exceptional circumstances - we've published separate guides, but here we'll focus primarily on interest-only.
In essence, you pay only the interest on the loan and none of the original capital borrowed each month.
Short-term, that's excellent news. Your outgoings will be minimal, and you retain more profit from your rental income.
However, it would be best to plan to determine how you will pay back the balance when the term ends. It might be 25 or so years off, but a lender will still want to know your exit strategy to have some assurance that an interest-only investment loan is right for you.
For example, you might intend to sell the property when the term lends, repay the mortgage capital, and keep the profits.
Alternatively, you might anticipate remortgaging the same rental premise or repaying the funds in an alternative way.
Best Buy to Let Mortgage Rates Based on Loan to Value Ratio
Loan to value, or LTV, is the ratio of the amount you wish to borrow compared to the value of the property. Most buy to let loan to values are capped at 75%, and therefore most investors will need to have a minimum 25% deposit available.
There are funding options to help with the deposit requirements should you not have a deposit to hand, but have found the ideal investment project.
Note that these are typical deposit requirements. If you have a smaller deposit but a compelling rental investment opportunity, there is usually a way to structure the finance to ensure you can go ahead.
Likewise, a larger deposit will make your application more compelling and improve the rates available to you.
Bridging loans are a short-term cash flow solution and can lend against most types of project, including commercial property investments, land development projects, and refurbishments to resell.
If you're unsure about the LTV ratio you need or whether your deposit is sufficient, please give Revolution Brokers a call. Our team of expert consultants specialise in the buy to let mortgage sector and can identify exclusive deals and negotiated terms, tailored to your borrowing requirements.
Securing a New Build Buy to Let Mortgage UK
Some landlords or property developers may consider investing in new-build properties. These can be an excellent choice of investment and a cost-effective buy to let property with minimal maintenance required.
Mortgage lenders work by assessing each application individually, so it is essential to discuss your projects with a specialist broker or lender to ensure that you apply to the correct buy to let mortgage provider.
Different lenders have different criteria and types of property they will lend against, so using a professional broker will save time and ensure that you get the best deals on the market.
Many finance options are available, such as specific buy to let mortgages for new builds and refurbishment mortgages that lenders can adjust to fit your project.
Average UK Buy to Let Mortgage Deposit Requirements
While the standard LTV ratio is 75%, specialist buy to let lenders may consider different types of applications at a higher risk level - although a lot depends on the circumstances. You may be looking to expand an existing property portfolio, invest in an auction property, or be embarking on an extensive refurbishment project.
Some property developers may not have the deposit to hand for the most competitive buy to let mortgage structure. They need a tailored solution to move forward with their investment plans.
Specialist lenders can negotiate and be flexible on loan to value required, so if you need a bespoke financing solution, give Revolution Brokers a call. We will help to structure your lending around your needs.
While you'll save costs by having a 25% plus deposit, our consultants can advise on available solutions with a lower initial down payment.
Best Buy to Let Mortgage Rates at a Competitive Loan to Value
Mainstream lenders are usually most able to lend to experienced investors, with a track record of trading and credit history.
If you are a new property developer or starting a new buy to let business, you may find that high-street lenders are unable to extend credit without having a minimum period of experience.
Should this apply to you, give us a call or drop us an email at firstname.lastname@example.org - we work with developers and landlords large and small, experienced and new, so can help in any scenario.
Some lenders will require a larger deposit of at least 25%, and charge higher rates of interest than you would pay on a typical residential mortgage. There are other affordability criteria to meet, such as demonstrating that rental income will be at least 145% of the annual mortgage repayments.
Revolution Brokers work with a network of reputable lenders who understand the buy to let property sector and can offer competitive buy to let loan to values. Specialist mortgage providers can also adjust their requirements for rental revenue to 125% of the mortgage costs.
One of the benefits of higher LTV buy to let mortgages is that they are usually faster to apply for since the lenders have the security of assessing the local rental market. That provides a stable basis to lend against and means that your personal income is not the only criteria.
Best Buy to Let Mortgage UK Products for Portfolio Landlords
Landlords with four or more investment properties have other options available, such as portfolio mortgages.
While many mainstream lenders may cap the number of properties against which they can lend, specialist mortgage providers can fund multiple investment properties.
The benefit of a commercial buy to let mortgage company is that they tailor mortgage offers to your projects. That means that investors can secure finance for a broader range of properties, including those that high street lenders will often not finance, such as flats in apartment blocks, or units above retail premises.
It is worth noting that commercial buy to let mortgages tend to have more rigorous lending criteria. So you will need to provide business plans and documentation about your investment before you can secure lending.
However, the investment is usually chain-free, which means you can move quickly and therefore negotiate on the purchase value.
Buy to Let Mortgage Deposit Requirements
One factor to bear in mind is that lenders will all have policies about the deposit sources (i.e. where the funds come from) they will accept.
Typical deposits come from savings, proceeds of another property sale, or perhaps remortgaging another portfolio property to release capital, but that's not an exhaustive list.
Other buy to let mortgage deposits might come from:
- Personal borrowing or credit cards.
- Inheritances or gifts.
- Funds from selling other assets.
- Overseas income.
It's advisable to work with an experienced broker if your deposit for a buy to let mortgage comes from anything but personal savings.
Applying to the wrong lender could mean your application is automatically rejected and cause further problems down the line with multiple hard searches on your credit file.