It’s critical to get the best property finance possible for your real estate investments. There are a lot of mortgage products out there, and picking the one that is right for you isn’t easy. Each of the hundreds of lenders will have its own pricing and qualifying requirements, which can change at any time based on market conditions. If you’re still wondering why should I invest in property? Then check out our last blog.
Even if you’re a seasoned real estate investor, finding the best property finance for your next project isn’t straightforward. We’ve put together a list of things to think about to help you narrow down your options and get the best financial arrangement.
How many mortgages do you currently have?
The number of mortgages you currently have will always be of interest to a lender. If you already have more than three buy-to-let mortgages, some lenders will refuse to give you another one.
Other lenders will set a limit on the number of active buy-to-let mortgages you can have. This could range from five to ten buy-to-let mortgages. If you own a number of buy-to-let homes, you can have more than ten buy-to-let mortgages. In this situation, you can still get a mortgage from a specialised lender.
Total of your mortgage debt
If you have a portfolio of homes, any potential lender would almost certainly want to examine your total mortgage balance. Some lenders will set a restriction on the amount of money they are willing to lend you against this.
Furthermore, some lenders have a maximum amount that they will lend to any individual property owner or limited company. This is true throughout your entire portfolio. The bottom line is that if you already have a mortgage with a particular lender, they may be hesitant to lend you extra money.
Several lenders will want to know about your additional sources of income than rental revenue. They often have a minimum income criterion of roughly £15,000. Some lenders have a higher income requirement.
Your Portfolio’s LTV
A potential investor will almost certainly want to know the average LTV for your entire portfolio because it gives them a clear sense of current and future risk. If your average portfolio LTV is low, potential lenders will be more responsive. If this is the case, you will almost certainly get the greatest rates.
Portfolio and Property Interest Cover Ratio (ICR)
If you’re not familiar with the interest cover ratio (ICR), it’s a stress test that most lenders use to compare different interest rates. A potential lender will want to make sure that the rental income you receive from the property is sufficient to support mortgage repayments should interest rates fluctuate on a property-by-property basis.
When you have a portfolio of buy-to-let properties, most potential lenders will do ICR stress tests on your entire property. When it comes to stress tests for ICR, each lender has its own set of requirements.
So keep these factors in mind when you plan your next property finance transaction. Before approaching lenders, make sure you have all of the necessary information. This will make your life easier.