Investment Property Mortgages
Investment Property Mortgages | How To Ensure Lender Approval!
Investment property mortgages are much the same as other mortgages in one respect. Like standard residential mortgages, investment property mortgages require an assessment of your suitability to be a landlord. Some of the criteria for determining this are similar to those for residential mortgages, while others apply only to investment property mortgages. Here is a guide to some of the considerations applied to investment mortgages.
Providers of an investment property mortgage will apply stricter criteria to new landlords than to existing landlords with a track record in property management. This means that new landlords will find that they are asked to give similar guarantees for their investment property mortgage as for their residential mortgage.
Lenders will want to know that landlords can repay their investment property mortgages. This may mean that they need to have a job or be able to show some proof of their income. Lenders will want to be sure that investment mortgages will be repaid even if the property is vacant. This may happen for a short time between letting periods or for a long time if the rental market in a given area starts to slow. This is one reason that an investment property mortgage should be seen as a long term proposition.
BTL Money Considerations
Many lenders will want to make sure that new landlords meet a certain earnings threshold before approving investment property mortgages. They may also want landlords to be homeowners who are up to date with their mortgage payments. Paying a residential mortgage properly means that landlords will pose less of a risk when taking out investment property mortgages.
Another consideration, especially for new landlords, is a good credit report. Again, someone who is issuing investment mortgages is looking for signs of good, prudent financial management. More experienced landlords may not have to provide all these proofs when applying for investment property mortgages, as they will already have a proven track record in property investment.
Rental income is a key consideration when it comes to an investment property mortgage. This should exceed mortgage payments by around 120 per cent, though rental calculation values are constantly evolving. Lenders will also want to see that landlords have looked at the costs involved in refurbishing and running their rental property, so that their investment property mortgage make sound financial sense.
Like other mortgages, the deposit is an important factor when landlords are applying for an investment property mortgage. Investment mortgages typically offer a loan to value of around 75 per cent, which means that landlords have to find a 25 per cent deposit. This may increase to as much as 30 per cent with the lower loan to values offered on some investment property mortgages.
Finally, lenders are likely to impose conditions, on new landlords especially, before approving an investment property mortgage. This might involve specifying the type of tenant that may or may not rent the property, the type of property the BTL mortgage can be used for, the type of tenancy agreement and the affiliation of the letting agent, if one is to be used. All of these factors will affect whether landlords qualify for investment property mortgages.
