Whether you are investing in buy to let
property for the first time or looking to expand your portfolio, getting the
appropriate mortgage is likely to be the most significant decision you take –
and might determine the financial success or failure of your buy to let
Choosing a mortgage that does not offer you
all the benefits and features you require (so as no early repayment charge or a
cost-effective interest rate) may see you lose money.
Actually getting the ‘wrong’ type of mortgage
for your circumstances (for example, you choose a residential buy to let
mortgage when in fact, you want a buy to let holiday home mortgage) could be
construed as fraud by your mortgage provider. They could demand you repay any
outstanding balance immediately. Plus, allegations of financial fraud could see
you face difficulty getting any form of credit in the future.
Finding your own mortgage may be a decision
you wish to take on your own, by choosing the type of mortgage you need and
approaching potential mortgage lenders. But – with so much at stake – the safer
and better-informed course of action may likely be consulting a buy to let mortgage broker.
Why use a buy to let
Credit reference agency
explains that a mortgage broker works directly between you and potential
lenders at every stage of the process – from helping you decide exactly what
type of mortgage you need, through to matching your requirements and
circumstances to the mortgages available.
Although there are good reasons for
consulting a mortgage broker, there are many of them about. So, what questions
do you need to ask to choose a suitable mortgage broker for you?
Questions to ask
- your first step is to establish that anyone offering mortgage advice is
duly registered and authorised by the Financial Conduct Authority (FCA) – they
are legally bound to have such authorisation, and the FCA is there to help if
you are given erroneous advice, so check for yourself on the FCA Register that their name is listed;
- also ask what fees your mortgage broker charges – these might depend on
the type of product you choose or the value of the mortgage you arrange, suggests the Money Advice
- if your broker offers free advice, ask what commission he or she earns
from any buy to let mortgage you might succeed in arranging;
- some brokers give advice relating to lenders from across the entire
mortgage market, while others deal only with selected lenders, and some are
tied to one particular lender – so, you need to ask whether they are
“whole-of-market” or more restricted in their offerings;
- what types of mortgage is your broker able to arrange – for example, some
may be unable to help with holiday let mortgages or mortgages for limited
liability companies, while other brokers can help with any kind of mortgage;
- when you have determined what type of mortgage you need, ask your broker
how much you are likely to be able to borrow and what deposit you may need – often
expressed as a loan to value (LTV) ratio;
- precisely what range of services are offered by the broker – does it
include all of the paperwork and administrative work involved in making an
application, together with chasing the lender on its progress;
- when your broker recommends a particular mortgage or makes a mortgage
offer, ask them for a copy of the relevant European Standard Information Sheet
(ESIS) – which is a more detailed version of the previously issued Keyfacts.
A buy to let mortgage broker may help you
navigate the potential minefield of the mortgage market – but you must approach
the conversation armed with the relevant questions.