Buy-To-Let Mortgages

Buying a property as an investment to let can benefit the private landlord in two ways. Firstly, it can provide a stream of income, and secondly, many Buy to Let landlords purchase property because of the potential for long-term accumulation of capital growth. 

This section provides guidance about how to take out a successful buy to let mortgage, the pitfalls that may occur and the knowledge needed to avoid them.

If managed correctly, Buy-to-Let properties can be a good way to earn money and grow your property portfolio, accumulating greater value to be redeemed when you retire. 

As with all mortgage products, you must consider whether this mortgage type is most suitable for you, and we recommend taking advice from our team of experts contact us.

If not managed correctly, Buy-to Let arrangements can make demands on your time you may not of expected, and there are risks associated with the investment. There has been a surge in demand for Buy-to-Let mortgages over the last 15 years and then can be a sound investment. It is important to note that your returns on a Buy-to-Let mortgage are not guaranteed, and property prices can rise and fall, with the potential consequences of your money being tied up for long periods. 

You must also consider any impacts on your current pension arrangements.

BUY-TO-LET INTEREST RATES

Buy-to-Let mortgages often have slightly higher interest rates than other mortgage options.

SIZE OF DEPOSIT FOR BUY-TO-LET

Typically a minimum of 25% of the property’s value is required as a deposit.

IMPORTANT CONSIDERATIONS

Buy-to-Let mortgages are notoriously difficult to obtain, as the lending criteria is stringent.

You will find it difficult if you don’t already own your own home and you are likely to be expected to earn at least £25,000 per year.

THE RULES OF BUY-TO-LET

Unlike standard mortgages, which has different standards of regulation and includes detailed analysis of the rental income and also your own personal affordability to ensure you can still make payments if the property is ever empty. Rental incomes need to be verified by a surveyor, and this must be higher than the mortgage amount.

UNDERSTANDING THE COSTS OF BUT-TO-LET

There are numerous ongoing costs to having a Buy-to-Let mortgage, including stamp duty obligations, solicitor fees and completion fees, which need to be accounted for. You may also be required to pay for letting agents and finding tenants if you don’t already have somebody lined up to rent your property.

We also advise factoring in any emergency repairs, general maintenance costs and any specialist insurance required. Our team would be more than happy to discuss this Contact Us

First Time Buyer Mortgages

A mortgage is a long-term loan, which is usually provided by a bank or building society, and are secured against the property. There are a range of mortgage types, and you may recognise such terminology as fixed or tracker. There are many additional mortgage types which may be suitable for you, and the process is not straightforward.

You are advised to seek professional guidance before making a decision regarding your financial future.

Of course there are the usual questions, such as the type of loan you should go for; i.e. fixed rate or tracker, for example — but in the current market, lenders are far stricter with their lending criteria. Because of this, the knowledge and contacts of Direct Mortgages can be the difference between a costly mortgage and a competitive one.

When applying for a residential mortgage, it’s vital to not only get a competitive interest rate but also to find a product that suits your lifestyle and needs.

THINGS TO CONSIDER

• How much can you afford to borrow?
• How large is your deposit?
• How will you repay the loan?
• Do you want the security of fixed monthly payments?
• Do you need flexibility?
• How quickly can you move?
• How much are the fees?
• What does the process involve?

Flexible Mortgages

A flexible mortgage is designed to give you more control over your finances with varying degrees of flexibility – you should be able to overpay, borrow back overpayments, underpay and take payment holidays, plus as soon as you make a mortgage payment, the amount of interest you are charged each month is reduced.

Flexible mortgages are specially designed to accommodate the changes taking place in our working environment and lifestyles. Some flexible mortgages allow you to take payment ‘holidays’ where you can choose not to make monthly payments for up to six months. This is particularly useful for couples starting a family, or people taking time out to study.

With a fully flexible mortgage you can vary the payments to suit your circumstances. If you’ve got extra cash, use it to pay off more of your mortgage. Keep up the overpayments and you could pay off your mortgage years early.

MORTGAGE PAYMENT HOLIDAYS

With a flexible mortgage you can use the overpayments you have built up to cut back or stop your payments for a while. This is particularly useful for couples starting a family, or people taking time out to study. You could even borrow back any money you’ve already overpaid.

Some flexible mortgages allow you to “offset” the credit balances in your current account to reduce the overall interest charged on your mortgage which can also reduce the number of years it takes to repay your mortgage.

Commercial Mortgages

Whether you require a mortgage to purchase a business, want to buy a property for your existing business or want to restructure your finances with a re-mortgage. All commercial mortgages are by referral only.

Whether you’re a start-up or an established business, we’ll take the stress out of looking for finance, by finding you the most competitive rates available in the UK. Commercial finance has become more flexible and is now available to a wider spectrum of businesses.

Commercial Mortgages are available by referral for businesses via traditional high street banks and specialist lenders that will consider those with previous credit difficulties, bad credit history or insufficient accounts.

Typically, businesses tend to look toward a Commercial Mortgage in order to add longer term value in assets.

• Offices
• Pubs & Restaurants
• Shops
• Shops with living accommodation
• Hotels and guest houses
• Industrial Units
• Factories
• Farms

Discounted Mortgages

Whether you are buying your first home, moving house or switching from your current lender, look no further than Direct Mortgages for rates on a range of Discounted Mortgages. 

WHAT IS A DISCOUNT MORTGAGE?

Discounted mortgages offer customers the opportunity to pay a discounted interest rate for a set period of time. This guarantees you’ll pay a set discount below the lender’s standard variable mortgage rate for an agreed number of years, giving you the simple benefit of paying a lower monthly amount.

So, if you want to keep your monthly repayments at a lower level for the initial years of your mortgage, a mortgage with a discount rate could be for you. Typically, the discounted rates apply for between 2 and 5 years.

IS A DISCOUNTED MORTGAGE RIGHT FOR ME?

A discount mortgage is a mortgage where the variable rate is set below a lenders Standard Variable Rate (SVR) – for example if a lender has an SVR of 4% and the discount is 1%, then the rate will be 3%.

Please note that the discount is applied to the SVR, and therefore if the SVR changes, the discount will apply to the updated SVR. Discount deals account for around 5% of the market share and typically last between 2 and 5 years. 

When a discount deal end, your lender will usually transfer you automatically onto its SVR.

Before making your final decision on whether to apply for a Discounted Mortgage, as with all mortgage types, it is best to speak to your mortgage advisor as there are risks involved.

DISCOUNTED MORTGAGE CONSIDERATIONS

Your discount rate tracks the SVR and as you have no control over the SVR rate, this mortgage type does not offer much stability. You may find yourself in a vulnerable position when the mortgage deal expires and may face large rate increases when transferred back to SVR.

It makes more sense to choose a fixed rate mortgage if you are on a tight budget and need your repayments to stay the same.

You will face early repayment charges if you pull out of a discount deal before the expiry date.

Next Time Buyer Mortgage

Lenders frequently change their criteria and rates to suit market conditions and the days of being able to borrow just 3 x salary are long gone. Higher income multiples and affordability calculations have been introduced to keep pace with the rise in house prices.

With such a massive choice of mortgages on offer, we make sure that you’re not missing out on the most suitable deal and that you’re armed with all of the relevant information to make an informed decision on your next mortgage.

Please use our Contact Us if you would like to discuss your mortgage requirements.

YOUR MORTGAGE OPTIONS

When moving home, you can either pay off your current mortgage and start a new one for your new house, or move your current mortgage to your new property, both of which may incur a fee. 

As specialist mortgage advisor, Direct Mortgages can help you to work out which of these will be the most suitable for your particular situation. It may depend on factors such as how much of your existing mortgage you have already paid off, and the values of both the property you currently live in and the one you are moving to.

Re-Mortgaging

When you re-mortgage, you are switching your mortgage to another deal, and frequently another lender. Re-mortgages can be used for various reasons, most people simply switch mortgage because it will work out cheaper for them. For example, the introductory discounted interest rate may have finished with your current lender, so you could get another discount, or a fixed rate with another lender. 

Other individuals may use a re-mortgage to consolidate their debts or even pay for home improvements.

Direct Mortgages can help you to work out which of these will be most suitable for your particular situation.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage.

Tracker Mortgages

Your interest will rise and fall in line with another interest rate- typically the Bank of England’s base rate- for a certain period of time. This is usually two or five years.

The result on your monthly mortgage interest payments is that they go up when the base rate goes up and go down when the base rate goes down.

Direct Mortgages can help you to understand whether a Tracker Mortgage would be the most suitable for you, taking into consideration market variables and your own personal circumstances.