What can be done to get your first BTL mortgage?
Dreaming of owning a Buy to Let property? Getting your first BTL mortgage should be your first step into the world of Buy to Let property owners. Mortgages can be highly complicated and it is likely that a mortgage advisor would be required. Chances are you will need to own a main residence mortgage before being accepted for a BTL mortgage.
How much will you need to put down as a deposit?
Whenever you apply for a mortgage, you will need to pay an upfront deposit as soon as you successfully apply for the mortgage. Whatever amount not covered by the deposit is known as the loan to value (LTV). For example, if you were interested in purchasing a property for £500,000 and you put down a deposit of 5% (£25,000). The LTV value would be 95% as you would need to pay this amount back to the mortgage brokers over time. Please note that the lower the initial deposit is, the harder it will be to find a mortgage as it is considered less safe. Usually a higher deposit is required for BTL mortgages and this tends to be a minimum of 25%.
Steps that can be done to ensure that you can get your first BTL mortgage:
- Make sure that you put enough money aside for a deposit.
- Find the right property for you, and make sure that you can also afford it.
- Make sure that you build your credit score over time before getting a mortgage. For example, getting a credit card at 18 and using it regularly could massively increase your score if you pay on time. The higher your credit score, the more likely you are to be accepted at a better rate as a higher score reflects a lower risk to brokers.
- Find the right mortgage quote for you with a payment plan that is sensible when compared to your income.
- Mortgage brokers will also put you through an affordability test. This is a test where they will look at your spending habits in the past and assess whether you have had enough money left over to pay off the mortgage. It could be useful to reduce your spending in the short term before applying for a first mortgage.
- Decide whether the property should be purchased in your name personally or within a limited company. This is extremely important as the initial set up can be costly to change!
Please feel free to get in contact with our BTL team at PJCO as we are experienced in this area and we can help with any queries. We are also partnered with a mortgage broker. You can book a free discovery call by clicking the link below!
Please get in touch on 01273 441187 or book a discovery call with one of our expert accountants.
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