Finding the Best Mortgage Deal

Many buy-to-let investors use mortgage brokers. These brokers do not get commission from the purchaser (they would instead typically get commission from the banks or building societies on completion of the product you accept – hence you will not normally pay for their services). The use of brokers is most common with less experienced investors, or investors that have a particularly tricky borrowing requirement needing help. Repeat/simple transactions may not require a brokers help, but many investors would still use a broker to save time.

Off Plan Investments provides this service within our investment deals, we have a panel of established mortgage brokers who are more than willing to answer any questions or queries you may have regarding your property investment. You will be made aware of the progress of your property once reservation forms and mortgage applications have been sent and approved.

Please be aware that if you as a customer do not meet the stringent requirements set by the mortgage broker, then your buy-to-let mortgage will be denied.

How Much Can I Borrow?

Banks will normally look at the ratio of rental income to purchase price – they will ask that the gross annual rental income is at least 125% (easier lending criteria case) to 150% (tougher lending criteria case) of the annual mortgage costs (assuming Buy-to-Let non-discounted rate – e.g. some 0.5% to 1.5% above the SVR). This needs to be considered before putting an offer in on a buy-to-let purchase.

It is not a good experience to find that rather than getting 85% borrowing, because of the rental multiples, the bank will only lend you 75%. On a 100,000 pounds property you would have to find another 10,000 pounds, or turn the deal down (a time and money wasting experience).

It is therefore best to get an early estimate of the rental income potential from a reputable letting agent. You can then ask questions about the property concerned, with regard to its suitability as a rental investment, the local rental market and proximity to tenants / demand. If you are aggressively building a portfolio of properties, this simple mistake could lead you to buy only say 60% of the property that you wished to acquire because you are only able to borrow 75% rather than 85% of the purchase price.

Off Plan Investments has provided an example of financing a buy-to-let property, to show you the sort of calculations you need to make.

Many of the larger banks and building societies have good websites that have downloadable application forms and details of their lending criteria. To save time though and get access to all deals easily, I would suggest using a broker.

Lending Status

Building societies and banks lend money for residential buy-to-let and fairly standard types of investment property purchases. Typically, Banks prefer to lend money to individuals, rather than companies, trusts or entities with either single or shared ownership. This is most likely because the banks and building societies find that with loans to individual, there is single point accountability, they can repossess property quickly if there is a payments default and individuals are less likely to go bankrupt compared to companies. You will find it easiest to get a loan if you are an employee, preferably with a high salary in long-term employment. Self-employed people can get finance by completing a self assessment application – which is subject to verification from an accountant or other professional person. It is very difficult getting finance if you have no regular income, particularly if you do not have a large deposit for the purchase.

Size of Deposit

Buy-to-let mortgages can be obtained from most banks and building societies. They normally lend to a maximum of a least 75% with some banks going to 80%, with a small minority lending to 85 Off Plan Investments is not aware of any lender willing to provide more than 85% of the purchase price on buy-to-let purchases. Some lenders will also give funds for renovation or upgrade depending on the circumstance. Other lenders may require the purchaser to front these additional funds on top of the deposit.

Purchaser’s Income

Many banks and building societies require your gross (before tax) income to be some 25,000-30,000 pounds before they are willing to lend on buy-to-let property. A few banks do not actively consider your income or employment – rather, they will look at the buy-to-let property economics on its own and consider your credit history and assets/ liabilities.

Showing Commercial Acumen

Banks and building societies lending on commercial property (e.g. a large terrace house with ten bed sits) look favourably on borrowers who can demonstrate a good business case and have done a proper economic evaluation of the property, with risks and opportunities. Also, on normal/ standard buy-to-let applications, a short write-up about the marketability of the property, rental demand and potential for capital value increases is probably worth inserting under additional comments - though the banks may not take much notice of it - rather they will look at their specific lending criteria and judge your application on those merits instead.

Off Plan investments provide all the necessary information needed by brokers and the bank. This includes:

Valuation per square foot
Comparable property analysis
Capital growth predictions
Realistic rentals are evaluated using the formula of square foot and typical mortgage payment so to provide a break even or in most cases profit margin.

Off Plan can then make sure you fill in your application objectively with appropriate integrity. No optimistic numbers so we can fully verify your application – the number one rule in successful business is integrity. Example of Financing 1 bedroom flat

For your reference, Off Plan Investments has provided a is a typical list of purchasing costs for a 1 bedroomed flat in North West England (purchase price - 100,000 pounds):

Description	1 Bedroom Flat
Gross Sales Price	£100,000
15 % Discount	£15,000
Client Discounted Price	£85,000
Typical mortgage payment	£354

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