Buy to let mortgages on new build properties – Here is how they work…
Developers and builders work hard to make the dream of a new home a reality for potential buyers and investors. But it is essential to take your time before you commit, particularly if you are considering investing in a new home as a buy-to-let property for a rental income.
This article explains how to get a mortgage for a buy-to-let new build property. It will help you determine if this is the correct type of property investment.
We have a mortgage broker to provide mortgage advice free of charge, whether for a new build property, investment mortgages, rental property or residential property.
The mortgage advisor will introduce you to the few mortgage providers lending the mortgage deals you require. Whether it be a new build property or a buy-to-let mortgage, the lender will be tailored to you.
Can I get a mortgage to buy a property that is being built?
Yes. Because these properties are considered riskier, your choices of mortgage lenders will be limited.
Finding a lender willing to lend on a new build property might be harder, but that doesn’t mean it is impossible to obtain a buy-to-let mortgage for a property.
Our network has investment mortgage brokers who specialise in new-build properties and have strong working relationships with mortgage providers who will lend in these situations.
Talking to a mortgage broker before you start your mortgage application can increase your chances of a mortgage being approved.
Why is it harder to obtain a mortgage for a new build buy-to-let property?
They haven’t had a track record of generating rental income, maintenance and running costs or being on the rental market. These rental properties don’t have a history of attracting tenants. Buy-to-let mortgage lenders may consider them higher risk.
This is especially true when the property is unique in an area with few comparable buy-to-let properties.
New-build homes may also fluctuate in value, which will be determined based on property surveys and reports.
If you are buying an off-plan property, you will likely have more trouble getting approved for an investment loan. Before the construction work is complete.
These deals are even more uncertain because there are the possibilities of delays in the building work and the property’s price decreasing after completion.
What makes new-build buy-to-let different from older properties?
These properties may require a specialist lender to obtain buy-to-let mortgages. Their eligibility criteria are often more stringent than those for older properties. New build buy-to-let properties typically have higher deposit requirements, which is due to the greater risk that the mortgage provider takes on. For a property that isn’t a new build, the minimum deposit required is 15%.
New build lenders in the buy-to-let sector prefer borrowers with landlord experience, reducing their perceived risk.
Why not buy a brand-new, buy-to-let property?
While they are more challenging to obtain, some investors find new-build buy-to-let mortgages attractive because they are more energy-efficient and less expensive to maintain. The property can generate rental income immediately, and no additional development is required.
Buying a new build to rent can be cheaper than purchasing a buy-to-let before the development is complete. There is a possibility that the property will rise in value before it is completed. Some developers offer discounts of up to 5% for early investors.
Off-plan purchases come with greater risk because the buyer buys into a vision rather than a project. You must weigh variables like the potential for the property to lose value or delays during development.
How affordability is calculated
This will be calculated in the same manner as for older properties by the lender. The viability of the investment will determine whether you can afford a BTL Mortgage on a newly built property. The rental coverage forecast is sufficient to pay the mortgage payments. Most lenders expect 125-140% rental coverage.
Some lenders may also have minimum income requirements. BTL mortgage providers will only work with customers who make at least £25,000 annually.
Speak with specialist lenders here today. Your exclusive mortgage expert will off tailored advice.
What other factors affect eligibility?
The eligibility lender criteria for buy-to-let mortgages for new constructions are the same mortgage process as for older properties.
However, because new builds are a very niche area of BTL lending, it is important to seek professional advice if any one of the below applies.
- You have a poor credit history.
- You are retired
- For self-employed professionals, you will need a mortgage to buy-to-let with a record of approximate annual income.
- You’re purchasing property with non-standard construction.
Are new homes worth more?
Although some builders may offer substantial financial incentives to investors, your buy-to-let property won’t necessarily increase in value if you pay a reasonable price. Brand new homes are unlike new cars that lose value as soon as they leave the forecourt.
You should ensure you have enough money to cover the costs of selling a home you bought in 24 months.
Talk to an expert
You may be interested in investing in brand-new properties and intending to rent them out to tenants. Call today. We will match you with one of our expert mortgage brokers.
Our experts are all full-of-market brokers who have access to lenders throughout the UK. They are happy to answer any questions you may have and assist in finding the best mortgage for your needs at the most affordable price.
We offer a free service without obligations.