For landlords buying an investment property to rent out to tenants.
The buy to let market has changed significantly in recent years, but remains a solid long-term investment as long as you manage your risks and conduct thorough due diligence. The need for quality rental accommodation remains strong with demand continuing to outstrip supply across the country. This is due in part to a nationwide housing shortage, but the private rental sector is also proving to be a lifestyle choice for a significant amount of the population from young people through to retirees. Many appreciate the greater flexibility and freedom that renting provides along with the opportunity to live in locations that they might not otherwise be able to afford.
The criteria for obtaining a buy to let mortgage differ from lender to lender, but the following points provide a general guide to requirements in order to have access to the most competitive rates available:
A fixed rate mortgage ensures that your repayments remain the same for an agreed period – regardless of how interest rates may change – before reverting to the lender’s SVR (Standard Variable Rate) at the end of the term. Their appeal lies in the security and peace of mind that they provide. They make it easy for people to budget and make plans, safe in the knowledge that there will be no unwelcome surprises.
It is worth bearing in mind that fixed rate mortgages are relatively inflexible and there can be high penalties for exiting the deal early. Also, if the interest rate drops there is no advantage to be had if you are on a fixed rate.
The rate you pay on a variable rate mortgage is subject to change and you must be prepared for this from the outset. There are a few different types of variable rate mortgage.
Tracker mortgages follow the Bank of England base rate. The rate you pay will be an agreed percentage on top of this base rate and could go up or down.
A Standard Variable Rate (SVR/reversion rate) is the lender’s default rate. This is not linked to the Bank of England’s base rate and can be changed by the lender at any time.
Discounted rates will give you an agreed percentage off a lender’s SVR over a set period of time. It’s important to check the actual repayments that you will need to make.
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