Finding A Buy To Let Remortgage
When the housing market crashed a couple of years ago, it took with it another type of property development. Since the mid 1990s, banks have been willing to make a special kind of mortgage loan known as buy to let mortgages. These loans are for properties the buyer intends to rent out and the repayments are calculated based the projected rental earnings for the property rather than the wages and earning of the buyer. These loans dried up completely for a while and nobody was able to acquire one. Today, however, banks are again beginning to make buy to let loans and allowing property owners to take out a buy to let remortgage.
A buy to let remortgage can be used to refinance the original mortgage and take advantage of more favorable interest rates and payment terms or to finance another property purchase when the owner is seeking to grow his/her portfolio.
Finding a buy to let remortgage may not be as easy as it once was, but there are several lenders willing to extend the credit if the property owner has a good enough credit score. If the property is currently rented and the owner can show proof of the income it generates, that will make it easier to obtain the loan.
Repayment terms for buy to let remortgages can be set up so that the owner is required to pay only the interest due each month or as a full repayment loan. Which terms work best for the owner varies from one property owner to another and one portfolio to another.
In general, the key criteria that banks look at when making a decision on a buy to let remortgage is whether or not the property can produce income equal to 125 percent or more of the interest that will be due on the loan each month. If the answer is yes, the loan will likely be approved.
Using a buy to let remortgage to fund the purchase of another property can be a smart business decision. This way, the property that is already mortgaged remains the only one being risked in the event of problems repaying the loan. It is also easier to handle a single loan payment each month than to worry about separate payments for separate properties.
The real advantage to having a buy to let mortgage or remortgage is that the income from the property is expected to be sufficient to cover the bulk of the payments. Depending on what one does for a living, other sources of income may not necessarily be enough to even come close on loans for properties of any size.
Finding a buy to let remortgage may take some time and effort on the part of property owners. Expending the effort should be done though if one wishes to refinance his current buy to let mortgage to take advantage of changes in terms or to finance a new purchase without risking the new property. It may also be easier to get a buy to let remortgage for a purchase than to get an original mortgage on the new property.