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Buy-to-Let in recent years has become an increasingly popular mortgage option for those wishing to invest in residential rental property.
However, some potential investors are put off entering the buy-to-let market due to the popular perception that buy-to-let mortgages are expensive.
This popular misconception no longer holds true as lenders today are now offering increasingly competitive rates, which in many cases are generally not significantly higher than those on standard mortgages.
Landlords also have a choice between interest only and repayment mortgages. However, buy-to-let mortgages do differ in several important ways from standard mortgages.
A major difference is the criteria lenders apply when considering approving a loan. Buy-to-let mortgage lenders base their decisions generally on whether or not to approve a loan on the likely rental income from the property and not the applicants' income.
In order to secure finance, rental income is typically needed to be 125% of the mortgage repayment, although as little as 100% rental coverage is available.
Many of us are looking for a better mortgage deal, or would like to release some of the equity in our home but the process is often not as easy as it first appears.
So what do you need to know before you seriously consider remortgaging?
The first step is checking your terms and conditions of your existing mortgage. These will tell if you are tied-in to your mortgage deal or if there are any early repayment charges. You can then decide if it is worth switching to a different rate or stay put until the penalties have expired.
There are broadly four types of deal on offer that we can talk you through in more detail and find out which option suits you best.
The whole process should take about a month to complete.
Once you have received a completion statement from your solicitor or new lender, the process has finished and your new mortgage is in place.
Are you struggling to get finance due to your poor credit history? Do you have CCJs, Defaults, Mortgage Arrears, Repossessions or have been bankrupt.
There are thousands of mortgages including many exclusive deals with a huge range of lenders, offering a wide range of poor credit history mortgages with some special features.
Are you having trouble finding a mortgage because you're self-employed or have an irregular income? Then a self-certification mortgage may be the mortgage option for you. But do you qualify for this type of mortgage?
In a nutshell a self-cert mortgage allows you, the borrower to certify your own earnings without having to supply proof of income documentation, such as pay slips or fully audited accounts.
With around 15% of the UK population now being self-employed, self-cert mortgages are becoming increasingly popular.
As the market becomes increasingly competitive, the deals available are just getting better and better.
Self-cert mortgages are ideally suited to those who are self-employed, or employed but have an irregular income, due for example to bonuses and commission. They are also ideal for those who have several jobs, are seasonal wage earners or those who regularly undertake contract work.
If you're thinking about buying your first home you're probably finding the whole process of choosing the right mortgage and actually buying your ideal home rather daunting? So what do you need to know to get on to the first rung of the property ladder?
The amount of mortgage you can get depends on your income.
Income multiples do vary. As a rough guide, a typical multiple is four times your income. This figure could be higher or lower depending upon your individual circumstances and different lenders' criteria. Some lenders do not use income multiples at all and will lend based on affordability.
Once you add to this the amount that you can afford to pay as a deposit, you have the amount you can pay for your first property.
It is also worth remembering the additional costs, on top of your deposit and mortgage that you will be expected to pay.
For example, you will have to pay stamp duty, which is 1% of the purchase price for properties between £175,001 and £250,000, then 3% up to £500,000 and 4% on properties over £500,000, for properties up to £175,000 you do not have to pay stamp duty.
Plus you will have to pay for the survey and the valuation of the property, and solicitor's fees.
You may also have to pay an arrangement fee for the mortgage and in some cases a Higher Lending Charge - which is insurance for the lender for you defaulting on your payments when your property is worth less than the loan.
Do you want to purchase or develop your own business premises?
Or do you simply need finance for investment purposes to buy or develop residential and commercial property for the rental market?
Alternatively, are you planning to purchase a commercial property for investment purposes or need finance to develop and refurbish the property you are currently renting?
The market offers a wide range of commercial mortgages with some special features:
Whilst building insurance will protect your actual property, it does not cover all the contents of your home. This type of cover will protect your furniture, soft furnishing, white goods and personal items.
Landlords can protect their belongings but tenants can also protect their own belongings with content insurance and can also opt for accidental damage cover to protect them if they damage the landlord's belongings!
Damage to your property can be costly to repair, especially with a major event such as a fire or storm damage.
All lenders will insist that you have this type of cover in place and it is actually a condition of your mortgage.
The cover provided can vary and most providers will offer additional protection, at a cost, for things like:
These are just a few of the extras available. The basic contents cover may not provide all the cover you require and additional areas of cover can be purchased to suit your individual needs. Discounts may be available for those in a neighbourhood watch scheme or for those with a burglar alarm etc.
A policy that in the event of any damage to your property, will give you a sum to cover the majority of the cost of repairs.
Damage to your property can be costly to repair, particularly when dealing with fire or storm damage.
All lenders will insist this type of cover is in place as it is a common condition of any mortgage.
If you don't have this type of cover, you will be responsible for the cost of repairs. Cover generally includes:
These are just a few of the perils covered. The policy can also be extended to protect your property against events like accidental damage.
A policy that provides a regular income if you are unable to work because of sickness or disability.
Many people make the mistake of thinking that should they fall ill, have an accident or lose the ability to work, the State will step in. Wrong - the rules governing sickness benefit claims have changed dramatically.
Income Protection should be considered if you would not be able to maintain your standard of living on State Benefits alone.
If your regular outgoings are normally met from income, then taking away that income can have drastic and wide ranging implications including inability to meet mortgage and loan payments, as well as basic household bills and living costs.
Plans are available for employees, self-employed people and even those who do not work but are responsible for managing a home.
When taking a policy out you can normally set it up in a variety of ways - each will pay out in a different way and therefore has an effect on the monthly premium. The different criteria include:
It is important to ensure you take out the policy that best suits your circumstances, not necessarily the one that provides the cheapest premium.
A policy that provides a tax-free monthly income if you are unable to work as a result of medium term sickness, incapacity or unemployment (normally 30 days or more).
Many people make the mistake of thinking that should they fall ill, have an accident or lose the ability to work, the State will step in and sort it all out. Wrong - the rules governing sickness benefit claims have changed dramatically.
Before April 1995, you could qualify for long-term sickness benefit if you were rendered incapable by illness or disability, of doing your own job of work. Now the rules state that you will only qualify for long-term sickness benefit if you cannot do any job of work. In other words, only if you are completely incapacitated will the State pay you any benefits. This means that, to all intents and purposes, there are currently no long-term sickness benefits in the UK.
Even if you do qualify for getting long-term sickness benefit from the State - and it's currently around only £66 a week - that benefit is now taxed.
This policy is similar to Permanent Health Insurance (PHI) with two main exceptions:
A policy that pays out a lump sum on diagnosis of a serious condition, such as heart disease or cancer.
Advances in medical science mean that more people are now surviving serious illness than in previous years. While this is good news, many people are faced with the realisation that they may not be able to return to work, or indeed, wish to.
Critical Illness is, in many ways, similar to Life Insurance with the difference being the insured is still alive.
Critical Illness plans are built around the most common serious conditions, such as:
Some policies may include other illnesses such as Alzheimer's and Parkinson's disease. Or may include a list of less common conditions, such as blindness or coma.
Critical illness is often bought as an optional extra on a life insurance contract.
*Not all types of heart attacks are covered.
*Not all types of cancer are covered.
A policy that pays out a lump sum or income to dependants in the event of your death.
The loss of a spouse or parent can leave dependants with additional issues to cope with other than the emotional. If you are inadequately insured, your dependants may be left with a dramatically reduced household income, which could affect their quality of life. Potentially there may be reduced opportunities for children such as the ability to pay for a university education or difficulties in maintaining mortgage payments on a reduced income.
In the event of your death, a lending institution will not write off your debt. Rather, they will continue to pursue the debt through your dependants and could, ultimately, foreclose on the loan meaning the loss of the family home.
The main benefits the State may provide are the Widowed Parent's Allowance and Child Benefit. Depending on whether the widow(er) qualifies for Income Support, the State may or may not help with paying the mortgage interest.
The method for calculating which benefits an individual may qualify for is extremely complicated. More information is available at the Department of Work and Pensions website www.dss.gov.uk.
There are many different types of plan, designed to address different shortfalls, these include: