The Financial Conduct Authority does not regulate some types of commercial or buy to let mortgages in Coventry.
In the mortgage world, there are a wide variety of routes that someone buying a property in Coventry can go down. From first time buyer mortgages in Coventry, to remortgages in Coventry, holiday lets and even HMO properties, there’s a lot you could do!
One of the options that we come across most, that is incredibly popular for property buyers, is a buy to let mortgage in Coventry.
A buy to let in Coventry is a property purchased as an investment, it’s not a property you can live in, the sole purpose is to generate income. If you have been a private renter at some point in the past, it is incredibly likely that you have a buy to let mortgage in Coventry.
For a property to have the classification of a buy to let in Coventry, it has to be mortgaged as that type of property, with the landlord expressing their intent to rent. The tenant will be paying a monthly rental fee, that in theory should cover the monthly mortgage costs that the landlord has, plus extra.
There are many different factors to take a look into, before you are able to determine your eligibility for taking out a buy to let mortgage in Coventry.
Some of these factors will include the type of property you’re looking to purchase, how old you are (you need to be at least aged 21 and not all mortgage lenders will let you borrow past aged 75), as well as any prior experience you have of being a buy to let landlord.
The biggest factors to look at are affordability, the minimum required deposit for a buy to let mortgage in Coventry and lastly, your credit score.
For you to be able to prove that you are eligible for a buy to let mortgage in Coventry, you will need to prove to your mortgage lender that you can afford it. Most mortgage lenders base their criteria on what the projected rental income will be.
Projected rental income is the figure that your mortgage lender believes you should charge as rent, in order to cover the costs of your monthly mortgage payments, plus some more. There will be a set requirement for this, which is calculated based on the property value.
Further to this, there are some mortgage lenders that work with buy to let mortgages in Coventry, that will also have a minimum income requirement. This typically sits around £25,000, though this will entirely depend on your mortgage lender.
An expert mortgage broker in Coventry with experience in working with buy to let mortgages in Coventry, such as Coventrymoneyman, will look to find the most suitable mortgage lender for your plans, as well as with the best deal for your buy to let investment purchase.
As tends to be the case with most purchases, there will be a need for you to put down a deposit. For a buy to let mortgage in Coventry, you are typically looking at a 20-25% deposit on the property, though can be more or less, depending on your mortgage lender.
The reason that they require this deposit, is to reduce your risk to the mortgage lender, as a higher deposit means you borrow less against the property. You’d be giving yourself a 75-80% loan to value as well, which gives you much better interest rates.
If say you had bad credit when applying for a buy to let mortgage in Coventry, you would be seen as a higher risk to the mortgage lender than the standard applicant, perhaps warranting the need for an even bigger deposit.
It may be entirely possible to get a buy to let mortgage in Coventry even with a poor credit score or with a history of having bad credit, though your mortgage lender options may be much more limited. There may even be some who won’t lend to someone with bad credit at all, depending on severity.
Fortunately, there are mortgage lenders who are willing to consider buy to let bad credit mortgages in Coventry. Of those mortgage lenders, they will want to again look at how bad it is, possibly requiring a higher deposit than you otherwise might have saved up for.
In order to make an application for a buy to let mortgage in Coventry, you’ll first need to find a property that you would like to buy.
From that point, the next step is to get in touch with an open & honest buy to let mortgage advisor in Coventry, in order to confirm your eligibility. They will also check the market for the absolute best deals for you and arrange your mortgage agreement in principle.
Once you have this document, you will be able to make an offer on the property you wish to buy, which will lead on to your full mortgage application process, providing that offer is accepted.
Typically speaking, the majority of buy to let mortgage investors will take out an interest only mortgage on their property, as this means only paying interest per month, lowering your monthly outgoings.
Once the term comes to an end, you will owe the remaining capital balance. This is either covered by remortgaging it onto a repayment mortgage or by selling the property. You may be required to set up a repayment vehicle, to cover the costs.
Whilst this is mortgage type we come across the most with buy to let in Coventry (and is perhaps more tax-efficient for some), repayment mortgages are still valid options for buy to let landlords. This means your mortgage, much like a standard residential, would be interest and capital combined per month.
Even though this will likely increase your monthly mortgage payments, equity can grow quicker in your property. Furthermore, when your term ends, you will own your property outright, negating the need to pay back any large capital owed.
As discussed, a mortgage lender will want to stress-test your projected rental income, as a means to see how much you would have to earn in order for your monthly mortgage payments to be safely covered.
In terms of the amount that you are able to borrow, providing that your projected income can cover the amount you wish to borrow, you typically won’t have many limits. A mortgage lender may still want to see though that your projected rental income exceeds how much you owe per month, by a set amount.
You will need to provide your mortgage lender with a series of documents, before you are able to proceed with your buy to let mortgage process. This can include things like proof of income, deposit, your ID, address, any bonus or commission you earn and your current/most recent P60.
If you are a self employed mortgage applicant, you also typically need to provide your SA302 tax returns. Existing landlords may also be required to provide proof of rental income, which usually is found in the form of an ARLA-regulated report, as well as a mortgage statement for your other properties.
Having as much of this with you as you can, prior to starting your buy to let mortgage process, will allow you to move through your mortgage application much quicker, so we would absolutely recommend being as prepared as you can be.
Of course any mortgage will have a series of costs involved and a buy to let in Coventry is no different. There will be your deposit, you could have mortgage arrangement fees, application fees and even broker fees, plus your monthly payments, all things you may be expecting.
Further to this though, there may be additional fees such as solicitors fees, disbursement fees, stamp duty land tax, valuation fees, product fees and mortgage exit fees.
Your mortgage advisor in Coventry will be able to give you a more accurate look at the potential stamp duty rates. If you ever decide you wish to leave your buy to let mortgage in Coventry early, there may also be an early repayment charge (ERC), which are often very expensive.
Lastly, you’ll have to consider the different costs that exist beyond just a mortgage and mortgage process, such as landlords insurance, letting agent fees, income tax and then of course the standard property maintenance costs.
Over time you are likely going to have tenants that need something to be looked at or fixed. Depending on the works that will need to be carried out, as well as the contractors you are working with, this can vary from cheap to quite costly.
All of the various costs that are involved with a buy to let mortgage in Coventry will depend on both your mortgage lender and personal/financial situation. Not every cost will apply, though your mortgage advisor in Coventry will make sure you are aware of all these costs.
As a general rule, yes you will be able to remortgage a buy to let in Coventry. Common reasons we hear for landlords looking to remortgage a buy to let in Coventry, include releasing equity as a means of funding the deposit for a further property purchase.
The equity that is sitting within your buy to let in Coventry works a little differently than a standard residential property, if you happen to be on an interest only mortgage. Typically, your balance and interest would come down together, creating a much bigger gap between the balance and value.
With an interest only buy to let in Coventry, you would only see the interest come down. That means your equity depends on your deposit and if your property is now worth more than it was. Those who have an interest only mortgage may also decide they wish to pay their capital after all.
This is something that could be achieved, by remortgaging your buy to let in Coventry from an interest only mortgage onto a repayment mortgage. Whilst your mortgage payments would be higher, you would be able to pay both interest and capital together.
Though you may have limited options, you may actually be able to get a buy to let mortgage in Coventry, as a first time buyer in Coventry. With buy to let mortgages in Coventry as a first time buyer, you will most likely need to put down a bigger deposit, so you can access the amount you would like to borrow.
In addition to this, it is important to remember that you would be losing benefits that first time buyers get, such as stamp duty. This is because you will not be living there and buy to let landlords will have at least some level of stamp duty that they owe on their properties.
For some first time buyers in Coventry, you might find that being a landlord is actually a good way to create a boost to your income, prior to going on to find a property of your own with a mortgage.
Please bear in mind that when this happens, a mortgage lender will be assessing you on that second purchase with the knowledge that you already have taken out a mortgage in your name before. This could affect your affordability or lower the amount that you are able to borrow.
Last edited 12/01/2023