Buy to Let Auctions
How To Get A Buy-To-Let Mortgage On Auction Property In Bristol
In common with many cities across the UK, demand for rental properties in Bristol has boomed in recent years. While property purchase prices in the area have generally risen over the past few years, tighter lending restrictions by most mortgage lenders have made getting a mortgage more difficult — especially for buyers trying to get that first foot on the property ladder — and many people are instead choosing to rent.
These conditions make it a potentially lucrative time for those in a position to buy a property to let out for rental income. Another consequence of recent financial conditions is that more properties are becoming available to buy through auction — an ideal way for canny investors to pick up a property at a good price, that they can then let out for regular income.
Buying a property at auction
For property investors and landlords, house auctions can be an excellent way to acquire a rental property at a knock-down price. However, if you’ve never bought a property at auction before, it pays to do your homework first, as you’ll find the procedure (and the potential pitfalls) a bit different from the usual house purchase process you’ll be familiar with.
Some properties are auctioned simply to achieve a quick sale … but in other cases it’s because the vendor has been unable to sell the property through normal channels. There may be a defect, non-standard construction, or some other problem that has made the sale of the property difficult. It’s important to consider why the property is being auctioned, and to carefully look at its condition before bidding.
Where possible, check both the property itself and the title documents for any indication of structural or other problems, and to determine if the property will need significant upgrading or renovation before it will be in a position to let out. It can often pay to engage professional assistance from a solicitor or chartered surveyor.
Arranging a Buy to Let mortgage
When buying a property at auction you should take steps to arrange finance in advance — auction purchases typically require a 10% initial payment, with the payment balance required within 28 days. Commonly, successful bidders will arrange short-term bridging finance to cover the purchase outlay, then replace this with a specialist Buy to Let mortgage once the property is in a condition to let. In other cases bridging finance may not be required.
If you haven’t bought a property to let before, it’s important to understand how Buy to Let mortgages work, as the application process can differ from other residential mortgages. For one thing, the application isn’t assessed on your income and expenditure, but rather on a comparison of the mortgage payment amount and the anticipated rental income. Lenders typically require the monthly rental payment to exceed the mortgage payment by a given percentage (e.g. at least 125% of the mortgage monthly payment). Note that the projected rent figure they use will often be based on a surveyor’s assessment, rather than your own estimate. For a guide to calculating your earnings on a buy-to-let property investment in Bristol, click here.
Due to the higher risk associated with Buy to Let lending, most lenders will only lend a maximum of 75% of the property value. However, this can vary from lender to lender, and some specialist Buy to Let lenders may offer up to 85% Loan to Value. By dealing with an experienced mortgage broker like Steve Mears Independent Mortgage Services, you can be sure that you will have access to the most suitable deals available and, more importantly, that your application will be handled by an experienced mortgage expert who will keep you informed every step of the way.
To find out how they can help you with your BTL mortgage, please call 0117 325 1130 or request a call back by entering your details in the form on the right.