The mortgage market has grown a lot in recent years. And this allowed it to evolve even more than in the past. Nowadays, there are several new methods such as buy to let mortgages and remortgage that are very advantageous in certain situations.
But before you make any decision it is important to gain a thorough understanding of this method. Only then can you be sure that it fits your needs and will bring you only benefits without drawbacks. And you will find most of the information you need in this article.
Basics You Should Know About Buy to Let Mortgages
First, what are buy to let mortgages? How are they different from normal ones? In essence, these types of mortgages are the same as the regular ones. You borrow money to buy a property. And you still need to have at least 25% equity at the moment of the purchase.
The difference appears when you need to make the payments. Unlike the regular method, in buy to let, you can only pay the interest during the period of the contract. And you can pay the borrowed sum at the end of the period, all at once.
As you can tell, this difference can have a massive impact on the strategy that you can use to invest in properties. And if you know how to properly use remortgages, then you can accelerate the process even more. But it also comes with some significant risks attached.
Not Everyone Can Use the Buy to Let Method
Because the risks are higher than those of normal mortgages, not everyone is allowed to use the buy to let alternative. In most cases, only businesses that are opened for investment purposes can use it. And those that wish to buy a property to live in it can’t and shouldn’t use it.
The main reason for that is the massive payment that must be done at the end of the contract. If the property is not used to make money, for example, from rent, then the risk that you couldn’t pay your debt is very high. You can check the criteria for this type of loans directly on a lender’s website.
Most entities that provide these types of loans are afraid to lose their money. So, they won’t let you borrow money if you do not meet these requirements. The best option that you have is to look for professional advice from brokers. With their help, you should be able to find the best option based on your situation.
You Can Also Remortgage a Buy to Let
Another thing you need to know about the buy to let loans is the fact that you can remortgage them as well. That means that you can find a new lender or make a deal with the same one to increase the period of the contract.
You may wonder why would you do that? Well, if you use the property you bought to make money, then you may either have some problems and not be able to pay the full dept at the end of the contract. Or, you may choose to use the money to buy more properties instead of paying your debt.
The second reason can be seen as very commonly used by the experienced investor in the real estate market. This allows them to increase their portfolio much faster than any other alternative. And even though it comes with significant risks, they have the experience and financial power to avoid any negative effects.
Potential Disadvantages That Buy to Let Mortgages Have
To properly understand the disadvantages that buy to let mortgages have, you need to properly understand the risks. The fact is that you need to pay your debt at the end of the contract. So, if you can’t find a solution, either simply paying it or remortgaging, then you will lose your investment.
So, your success depends on the ability of the property to make enough profits for you. It needs to both cover the interest you pay monthly and enough extra profits throughout the contract to cover your debt. You can find all the potential risks regarding this type of mortgages in this article.
But there are methods you can use to avoid the problems that you may encounter. The first one is to find a remortgaging opportunity a few months before your contract expires. And if you have the help of an experienced broker, then you shouldn’t have any problems in accomplishing that.
It is Better for You to Mortgage and Remortgage Normally?
Now that you have all the information you need about this type of mortgage and remortgage, the decision is all yours. Every person has different circumstances. So, as mentioned above, this method is not the perfect solution for everyone. If you are not sure that it fits you or if you want the opinion of an expert, then use the services of a reliable broker.
A good broker can either help you find the best deal from the buy to let market, provide you with advice and recommend the best type of mortgage based on your current situation, and even provide very useful advice that will massively help you in the future.
How to Find a Reliable Broker?
All you have to do is use the internet to check all the brokers in your area. If you like the convenience provided by the internet, then you can also find brokers that work completely online. So, you won’t be bothered by the distance between their office and your location.
The next step you need to take is to compare their achievements and choose the ones that can help you the most. This process may take you some time. But the effort can save you a lot of money in the future. So, make sure you do it properly and do not be afraid of spending a more hours if the results are worth it.