Buy-to-let mortgages: the basics

With a strong rental market in Edinburgh, property investment is often an attractive proposition. Here our mortgage adviser Brian McArthy tells us more about buy-to-let mortgages.

The buy-to-let market is buoyant in Edinburgh and the surrounding areas, with rental incomes having doubled in the last decade and the average rental income now in excess of £850 per month in the city.  It can therefore prove an attractive investment proposition over the longer term, both in terms of income provision and capital appreciation.

Purchasing a buy-to-let property is primarily an investment and lenders assess such applications quite differently from residential mortgages. There is a wide choice of lenders available but it is important to select the lender and mortgage deal that best suits your individual circumstances. This is where independent financial advice can be invaluable.

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Mortgage eligibility criteria

There are a number of criteria that you must meet in order to be eligible for a buy-to-let mortgage, the most common of which are outlined below.

A minimum deposit of 25% of the purchase price will be required and most lenders will require an income of £25,000 per annum. The maximum age of the policy holder at the end of the term is usually 75.

In terms of the rental income, it is very important that you get the balance right. Mortgage providers will expect rental income to exceed mortgage payments by at least 25%. The mortgage can be taken on an interest only basis, repayment or a mixture of both.

Generally speaking, lenders will require the applicant to be a current homeowner but there are some who will consider first time buyers and first time landlords. Again, an independent financial adviser will be able to offer you an insight into the best lender for you.

Returning a profit

In terms of your investment and returning a profit, mortgage interest and some other payments can be offset against rental income for tax purposes. This can therefore reduce the actual cost.

In terms of the property itself, most lenders are reluctant to provide a buy-to-let mortgage where there is an element of commercial property underneath or adjacent to the property. This is a very important point to bear in mind during your buy-to-let property hunt.

With ESPC, all elements of buy-to-let investment opportunities can be handled for you. ESPC Lettings can help you source information on the area in which you intend to purchase, including how suitable a property would be for a desired type of tenant, anticipated rental income and rental yields. This is all in addition to the services we can offer you in terms of mortgage advice.

As Independent Financial Advisers, ESPC Mortgages can help will all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Pop in for a no obligation chat with the team at our Edinburgh Showroom or give them a call on 0131 620 8680.

Brian McCarthy is a Financial Planning Consultant who aims to help those who need help finding mortgage solutions. He works with clients to find the mortgage that best meets their individual needs. You can call him on 07956 969 859 for more information.

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Buy-to-let mortgages are not regulated by The Financial Conduct Authority. The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain.