Buy to Let
Mortgages
·
I’ve come across one or two Estate
Agents that insist that you take out your mortgage through them as a condition
of you buying one of their properties. This practice is illegal and you would
be well advised to avoid this unscrupulous practice. In fact please report any
offending estate agents/brokers to the
Property Ombudsman https://www.tpos.co.uk/
·
Always ask if your mortgage broker
/ advisor is looking at the whole
market for the best and most suitable deals. Some estate agents and
mortgage providers will only promote the mortgages they get the most commission
on resulting in you not getting the best and most suitable deal available
·
Some estate agents will charge you
for mortgage advice. Don’t deal with them as free advice is available
from a number of other companies
Have your
business plan figures to hand when talking to your preferred mortgage provider.
Details such as your available deposit, monthly rental income forecast, details
of any other mortgages you have. A summary of any other income and expenditure
you have.
The following
formula is used by a number of lenders to calculate your affordability
rating:
·
Loan
Amount x Stress Rate x 125% divided by 12 – the result must generally be less
than the monthly rental yield.
o
So as
an example, the majority of lenders use a stress rate of 5.99%, so assuming a
loan amount of £100,000, the formula is as follows:
o
£100,000
x 5.99% x 125% divided by 12 = £623.95 (Minimum monthly rental yield)
Note
- Always talk to your preferred mortgage provider as they may have deals that
allow some flexibility in the above calculation
(Information kindly provided by South
West Mortgage Brokers)
To calculate a gross yield, calculate the annual income, e.g £700pcm
x 12 = £8400. Divide this by the
property value, e.g £150,000; 8400/150,000 = 0.056. Finally, times this figure by 100 =
5.6%. To work out a net yield, deduct
your expenses from the annual income at the start.
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