Mastering the BTL mortgage maze in a volatile market

In what has been a volatile time for the buy-to-let mortgage market, many landlords are struggling to find the right product.

Navigating the mortgage market can be a maze but with the right guidance, landlords can find a mortgage to suit their needs.

Here at Property118, we have worked with the team at Brooklands Commercial Finance for nearly 20 years to help landlords secure the most suitable financing solutions for their properties.

Excellent reputation with all the lenders

The team at Brooklands Commercial Finance advise on a variety of different finance sectors.

One of their advisors, Christine Stedmann, a residential and commercial mortgage consultant, brings extensive experience from her work in finance.

She tells Property118 about her career in the finance sector and why she decided to join Brooklands Commercial Finance.

She said: “I’ve always been in the finance sector; I’ve got over 10 years of experience in the banking sector.

“I’ve been in personal and commercial banking as well as corporate investment banking, but I’ve always been on the lending side of things.

“My main frustration was that I was limited to products that the bank had to offer its customers. I joined Brooklands as they are an established broker and are directly authorised by the Financial Conduct Authority (FCA).

“This gives me the ability to be able to offer whole-of-market solutions, as I can use any lender. This enables me to get the best outcome for my clients.

“Also, Brooklands has been trading for over 20 years and has an excellent reputation with all of the lenders.”

What is a buy-to-let mortgage?

Ms Stedmann says that BTL mortgages are similar to a residential mortgage – though there are a few key differences.

She says that the minimum deposit can be between 20% of the property value, though it’s usually 25%.

Also, most BTL products are interest-only so the borrower pays the interest on the loan every month but not the capital – which helps with a landlord’s cashflow.

Ms Stedmann adds: “As the property increases in value, the landlord can release some of the equity to buy further properties and increase their portfolio.

“Buy-to-let mortgages are also available on a repayment basis. These are often used by clients that are looking to maximise their retirement income.”

She adds: “Buy-to-let mortgages aren’t FCA regulated with the exception of consumer buy-to-let products which is when the landlord lets the property out to his or her family member and those consumer buy-to-let mortgages must adhere to FCA affordability rules.”

Work with specialist lenders

Ms Stedmann explains how Brooklands Financial Commercial can help landlords with a BTL mortgage.

She said: “Brooklands can advise you as to which category your property falls into. Then all our advisers can search with our sophisticated search tools and search for the best product for the client.

“We can quote a wide range of mortgages to landlords such as fixed-rate mortgages and variable-rate mortgages.”

Regarding eligibility requirements, Ms Stedmann explains Brooklands works with a variety of specialist lenders.

She said: “Historically buy to let mortgages were predominantly available to single residential units.

“Here at Brooklands, we work with specialist lenders who will now offer buy-to-let mortgages to properties such as HMOs, new build properties, student accommodation and a variety of other PRS properties.”

Common mistakes landlords make on buy-to-let applications

Ms Stedmann points to the mistakes that landlords make when applying for a BTL mortgage.

She explains some of the common mistakes: “Often the first mistake is prior to the mortgage application.

“The client may select a property that is not suitable for their requirements. For example, the property is in an area that produces poor rental yield and what that will do is impact the maximum amount of loan available to the landlord due to the low rental yield.

“Another common mistake landlords make is sometimes they underestimate the cost involved in running a property.

“Some landlords underestimate maintenance costs which can eat into profits at the end of the year, and failing to vet tenants can lead to all sorts of unimaginable challenges in the long run.”

Residential mortgages for first-time buyers

Ms Stedmann explains how Brooklands can help first-time buyers when selecting a mortgage.

She says: “With first-time buyers, we will fully explain the process from beginning to end, as it’s important that they fully understand the whole process.

“We will spend time with them on the fact find so that they completely comprehend all of the steps.”

If you’re considering renting out your property, Brooklands can assist you in transitioning from a residential mortgage to a buy-to-let mortgage.

Ms Stedmann explains the process: “ You need to ask your current lender for a letter of consent to let your current home out to a tenant and for you to buy your own onward purchase of a residential property.

“It’s best to act quickly because it’s something that cannot be done overnight.

“Here at Brooklands, we can help facilitate the process. The person initiating the request for a letter of consent from their existing lender would be the client themselves.

“We will then use our sourcing tool to find our client a suitable mortgage that fits their needs.”

Mortgage market has been volatile

The landscape of the mortgage market has been showing signs of recovery.

However, seeing lenders recently withdraw mortgage products with little notice has thrown many landlords into uncertainty.

Ms Stedmann explains: “In the last 18-24 months the mortgage market has been quite volatile. We have seen lenders pull their products with little to no notification at all which causes stress and chaos for brokers and borrowers.

“However, we have seen that happening less and less now in recent months and hopefully this means we are entering into a more stable period in terms of mortgage rates.

“The mortgage rates are coming down – slowly but are heading in the right direction.”

Landlords are worried about Renters (Reform) Bill

Ms Stedmann explains many landlords are worried about upcoming legislative changes such as the Renters (Reform) Bill.

She said: “The majority of landlords I speak to indicate that legislation (the government abolishing Section 21) is the biggest challenge they face.

“Many landlords also say they are strongly or very strongly against pets in lets and the recent tax changes for landlords that have not incorporated their portfolio.”

Ms Stedmann says despite the doom and gloom there is some positive news.

She explains: “The good news is as mortgage interest rates begin to fall and rents look set to rise further, so the financial pressures on landlords will ease and will, hopefully, lead to higher yields.

“If anyone is considering investing in property or expanding their current portfolio it’s good to pick up the phone and give Brooklands Commercial Finance a call.”

To find out more about the common mistakes landlords make during buy-to-let applications and residential mortgages, then watch the video below.

For assistance with any type of buy to let (BTL) property or commercial finance then please complete the contact form below and the team at Brooklands Commercial Finance will get back to you.

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