The Financial Conduct Authority does not regulate some types of commercial or buy to let mortgages in Nottingham.
In the mortgage world, there are lots of different routes that a property purchaser can go down. From a first time buyers in search of their first home, to existing homeowners remortgaging, holiday let properties and even HMO’s, there is plenty for you to do.
One mortgage type we regularly hear of, that is perhaps one of the most popular options for customers, is a buy to let mortgage in Nottingham.
A buy to let in Nottingham property that you invest in; It’s not somewhere you can personally live, the sole purpose is to make money. If you have previously been a private renter, you have likely lived in a property that has a buy to let mortgage attached to it.
In order for a property to count as a buy to let in Nottingham, it has to be mortgaged with the landlord’s intent to be to rent it out. The tenant will pay the landlord monthly, with that payment being enough to cover the landlords mortgage fee, plus a little extra.
There are many different factors to look at when determining if you are eligible for a buy to let mortgage in Nottingham, or not.
Some of these factors can include what type of property you want to buy, how old you are (you must be at least 21 and there will be a limit on the mortgage lenders who let you take a buy to let beyond 75), as well as any buy to let landlord experience you have.
The biggest most important factors to look at are affordability, the minimum deposit requirements and also what credit score you have.
For you to be able to prove that you are eligible to take on a buy to let in Nottingham, you will need to prove that you are able to afford one, to your mortgage lender. A large portion of mortgage lenders will base their criteria on what your projected rental income is.
Projected rental income is the amount that the mortgage lender believes you will need to charge, in order for you to be able to cover the costs of your monthly mortgage payments, plus a little bit extra. There will be a set requirement that the mortgage lender will calculate using your properties value.
As well as using a projected rental income, some buy to let mortgage lenders will also use a minimum income requirement, which is typically £25,000, though this can be entirely dependent on which mortgage lender you are with.
A trusted and experienced mortgage broker in Nottingham, such as Nottinghammoneyman, with knowledge of buy to let mortgages in Nottingham, will look to find you the most suitable mortgage deal for what it is you are looking to achieve, with the most appropriate mortgage lender.
As it tends to be with any purchase, you will also be required to put down some form of deposit. As a rule, when it comes to a buy to let in Nottingham, the minimum deposit is usually somewhere around 20-25% of the value of the property, though this can vary between mortgage lenders.
The reason that this is often higher than a residential purchase, is to reduce the risk to the mortgage lender. By putting down a larger deposit, you’re borrowing less against your new property. This will also open you up to a 75-80% loan to value, which can help you access much better rates of interest.
If you are even higher of a risk, say you’re applying for a buy to let mortgage in Nottingham with bad credit, you may be required to put down an even bigger deposit.
It may be possible for you to obtain a buy to let mortgage in Nottingham if you have a poor credit score or bad credit history, though you may be limited on your selection of mortgage lenders. There are also some who won’t lend at all for bad credit.
Looking at those mortgage lenders who may accept this, they will most typically want to look at factors such as how bad your credit history is and how it got to that point. Furthermore, you may be required to put down an even bigger deposit.
Before you look to make an application for a buy to let in Nottingham, your first task is to make a purchase on a property you would like to own and rent out.
From that point, you should look to get in touch with an expert buy to let mortgage advisor in Nottingham, so that they can confirm eligibility, review the market for the best mortgage deals, and get your agreement in principle arranged.
Once those steps have been completed, you’ll be able to make an offer on the property you like, which will progress into your full mortgage application, providing the offer you made was accepted.
For the most part, we find that buy to let investors, especially the serious ones, will look to take out a interest only mortgage on their property. With this type of mortgage, you will only be paying interest per month, which will be much cheaper than a repayment mortgage.
Once your term has concluded, you will owe the remaining capital balance, a little caveat that might be off-putting for some. Typically a landlord will pay this back by selling the property in question, or remortgaging onto a repayment mortgage. You may also need to set up a repayment vehicle.
Whilst this mortgage type most commonly occurs and is considered to be the most tax-efficient, you are still able to make an application for a repayment mortgage on a buy to let in Nottingham. As it would be with most mortgages, this will have you paying both interest and capital combined.
This type of mortgage can mean higher monthly mortgage payments than interest only, though it would also allow you to grow equity in your property. Once your term is due to end, you would own your property outright, without the need to make back any large capital payments.
As discussed above, a mortgage lender will want to test what your projected rental income is, in order for them to figure out how much you need to earn, so that you can cover the costs of your monthly mortgage payments.
Regarding how much you are able to borrow, as long as your projected income can cover the amount you are asking to borrow, you likely won’t be limited. That being said, a mortgage lender may also want to see that the projected rental income goes beyond the monthly payments by a certain amount.
So you can apply for a buy to let mortgage in Nottingham, you must provide a mortgage lender with all kinds of documents, before you can proceed. These documents can be, proof of your income, deposit, ID, address, any bonuses and/or commission that you get, and your current or most up-to-date P60.
Self employed applicants will have to typically also provide their SA302 tax returns. Existing landlords may also be required to provide proof of rental income, something that usually comes in the form of an ARLA-regulated report, in addition to a mortgage statement for your existing properties.
Having as much of this to hand as you possibly can, ahead of applying for a buy to let mortgage, can see your mortgage application progressing a lot quicker than it otherwise would, so it is definitely recommended that you are prepared ahead of time.
As tends to be the case with any mortgage, you will have some standard costs involved. You will also be required to put down a deposit, could have mortgage arrangement, application and broker fees, as well as your monthly payments to make. All the usual costs you would expect.
On top of this though, there may be a selection of further fees that you could have to pay. Some of the more frequently encountered ones include valuation fees, product fees and also mortgage exit fees. Furthermore, there may be some solicitors fees and disbursement fees, as well as stamp duty.
Your dedicated and trusted mortgage advisor in Nottingham will be able to more accurately advise on what your stamp duty rate might be. If you ever make plans to exit your buy to let in Nottingham early, you could also have an early repayment charge (ERC), which can be quite costly.
Lastly, you will also have to consider costs that will go even further than just your mortgage process. Landlord insurance will be something you need to think about as well, along with letting agent fees, income tax and then your general property maintenance costs.
From time to time, you may find that your tenants need something to be looked at by a professional. Depending on what actually needs to be carried out on your property and the contractors you are hiring, this can vary from either quite cheap, to quite costly.
Every single cost that is involved in your buy to let mortgage process will differ, depending on mortgage lender, as well as the state of your personal and financial situation. Some of these won’t be involved, though your mortgage advisor in Nottingham will make sure you’re aware of everything that is.
For the most part, yes, you can remortgage a buy to let in Nottingham. We often find that the main reason a landlord could be looking to take out a buy to let remortgage in Nottingham, is so that they can release some equity from the property, to put down a deposit on a further property.
The equity that is within your buy to let in Nottingham will differ from your typical residential property, if you are going with an interest only mortgage. Normally your balance and the interest would come down at the same time, creating a much larger gap between your balance and the value.
When you have an interest only buy to let, only the interest goes down. That means the equity within your home entirely depends on how much deposit you put down and if the home has grown in value. Relating to interest only mortgages, you may decide that you want to pay capital as well.
This may actually be possible for you to do, if you were to look at remortgaging your interest only buy to let property onto a repayment mortgage. This would give you higher monthly mortgage payments, but would let you pay off interest and capital together.
Though the options present may be limited, it is actually possible to obtain a buy to let in Nottingham as a first time buyer! When looking at this type of route, you will most likely need a much bigger deposit, in order to access how much you are asking to borrow.
You should also bear in mind that you will also be losing many of the first time buyer benefits, such as stamp duty. This is because this won’t be your primary residence and buy to let landlords will typically have some level of stamp duty to pay on their portfolio.
For a lot of first time buyers in Nottingham, becoming a landlord can actually be a very smart way of supplementing your income, prior to affording your own mortgage on a property down the line, when you are ready to take that next step.
It is important to remember that in this instance, a mortgage lender will look to assess you on your second purchase, fully aware that you already have a mortgage that is in your name. This could affect your affordability or lower the amount that you are able to borrow.