Investment and Buy to Let mortgages
This type of mortgage operates in a similar manner to a residential mortgage but the property itself is typically the subject of either a formal rental or lease arrangement between the landlord and the Tenant.
Loans are provided against the value of the property to a level of between 60-70% of the loan to value (“LTV”) over a term of up to 25 years. Interest rates are dependent on a number of factors which include for example the type of property occupied as well as both the strength of the tenant and the client (landlord) and their ability to meet the loan and or lease payments.
In the case of a commercial buy to let or investment mortgage then a key consideration would also be the lease itself and what terms are detailed within. Many of the main Banks will only consider lending over a term of years which falls within the lease period itself, i.e. if the lease is for 20 years then the term of the mortgage may not exceed 15 years. That said, there are plenty of other alternative lenders in the market who will consider lending against much shorter leases for longer periods i.e. 15 to 20 years even if the lease is for say, 5 years. The key message here is that each case is considered on its own merits taking into account the strength of the client.
Lenders will also look at the client’s ability to repay the debt in the first instance from the lease itself. So, typically the rent should cover any repayment by a factor of 1.5 times i.e. if your annual loan repayments are £10,000 then the rental should be at least £15,000. Again, there are lenders in the market who are happy to go below this figure by taking into account all other factors.
In the case of a Residential Investment Mortgage then the key considerations remain broadly the same other than in this case a lender would expect to see a property rented to a tenant by way of a Assured Short hold Tenancy agreement or AST as they are more commonly known as.
So, who can benefit from an Investment or Buy To Let Mortgage?
- Individuals or Companies looking to secure investment income from the property market.
- Professional and SIPP/SASS Investors looking to grow or refinance their existing portfolio of properties.
- Business owners who wish to secure a long term income by purchasing their current business premises and leasing the property to their own company.
Whether an individual or business seeking to acquire a commercial property for investment purposes in order to provide a regular source of income and / or capital appreciation then Cranfield has access to lenders who can help.
The search for the right financial solution begins & ends with Cranfield, so contact us today.