Understanding Buy to Let (BTL) Mortgage
Real estate Buy-to-let is a purchase of one property or more specifically to let it to another tenant. A buy to let loan is a type of debt that is expressly designed for such deals.
A buy to let mortgage are loans for purchasing or refinancing residential or commercial real estate which is let out to tenants rather than occupied or lived in by the borrower. Buy-to-let loans are typically designed for property investors and landlords and are classed as business transactions. Because it’s classified as a business, the rates and fees are higher than a private transaction.
The buy to let loans are typically going up to 70%-75% with the traditional lenders and up to 85% with some of the alternative lenders.
Most of the buy to let (BTL) mortgage lending is not regulated by the Financial Conduct Authority (FCA)
We at Property finance partners work in close collaboration with some funds that can structure a higher loan to value in suitable deals.
Buy to let has become a common phrase in the real estate sector and almost everyone in the industry uses this phrase when he means buying a property and renting it out. However, the essential points to such deals are:
An investment in real estate to rent them out.
Usually, the buy to let mortgages and loans interest only. Therefore the borrower will pay interest only each month (or quarterly, for companies borrowing from real estate funds) and the capital will be paid at the end of the term.
The deposit for a regular buy to let property deal is typically between 20%-40% from the value of the asset or the properties that the borrower wants to purchase. However, with finance structuring for suitable sponsors and deals, the picture is different.
Corporate, developers, landlords and property investors know that the interest rate that they are charged for such deals is higher than the regular mortgage however it is calculated in their financial calculations.
Good credit record is always important. For the mainstream lenders, it’s even crucial, but the alternative lenders are analyzing the whole picture and history, and it’s become less critical.
The amount of finance that a borrower can borrow in a buy to let loan or mortgage depends on some criteria, but the first two main criteria are: the Value of the property that the sponsor wants to purchase and the net annual rental income from it. Most of the lenders want to see at least 20% higher net income than repayments.
An example of a buy to let structured loan
The borrower is an experienced real estate group.
They have a portfolio of Buy to let properties residential and commercial.
The total existing loan to value that they have is 64% LTV
The annual yield on the portfolio is 6.5%
We succeed to structure a facility of 85% loan to value, that will refinance the existing debt and can be used as 100% finance for buy to let property deals.
The lender that offered this facility is a Global real estate fund.
To find out how we can help you with structured buy to let loans call today on 020 3393 9277