What's my Buy To Let (BTL) budget?
Getting confused about mortgage deposits seems to be part and parcel of becoming a property investor. We get questions all the time from crew struggling to navigate the murky waters of Yacht Crew mortgages. The biggest confusion for new investors seems to be the differences between mortgages you can use to buy your own home and mortgages you can use to buy investment properties.
There are actually multiple differences between the two types of mortgages including the length of terms offered, the personal financial requirements and the methods of repayment (repayment and interest only). For the purposes of this article, however, let's look specifically at the deposit amount you will need.
It's extremely useful to set a budget early on in your journey so that you can identify locations and types of property which you will be able to afford. Use the basic formula below to calculate your own property investment budget and then start your search from there.
As a general rule in the U.K. when you buy an investment property you will be able to borrow 75% of the properties value. It's also common to have to pay around £6,000 in various fees to your solicitor, sourcer, mortgage broker and surveyor etc.*
So for example, if you invested savings of £40,000 your approximate budget would be £136,000 for your property.
£40,000 (savings) - £6,000 (fees) = £34,000 (25% deposit)
£34,000 (25% deposit) x 4 = £136,000 (100%)
*not including UK purchase taxes called Stamp Duty Land Tax (SDLT) which differs from person to person.
There are almost unlimited choices when it comes to investing in property in the UK from £50,000 houses in Liverpool to £500,000 flats in London. Almost all property has its place in someone's portfolio but choosing the right investments for you is a very personal thing.
If you want to learn more about yacht crew mortgages or how to start building your own property portfolio then get in touch with a member of our team.