12 Jul Buy to Let Deposit Percentage or Amount- Don’t pay too much, or too little!
Buy to Let Deposit Percentage or Amount – Don’t pay too much, or too little!
Buy to let deposit amounts depend on the LTV, typically these currently are 35, 30, 25, 20, or even as low as 15%… with less lenders providing the lower deposit amounts of 15 to 20%. The common amount right now is 25% for most buy to let mortgage deposits, although this can soon change depending on the financial climate. In the past, it was typical to be 15% with the 85% LTV buy-to-let products that were available in the early to mid noughties.
At that time, the property prices were rising and banks couldn’t seem to lend out enough money. In fact, I was getting 87% LTV on some mortgages and then on top of that with a gifted deposit I could end up with cash back after buying a property! I recall getting a cheque from the solicitor on completion of a property purchase for around five thousand as I remember! As I discussed above, this does not mean it is a good deal. The lower LTVs are more sensible and safer from the point of view of the discussion above to protect both the lender and the purchaser.
As stated above, the reality right now is to expect something around 75% LTV meaning a deposit or equity requirement of 25%. Although you might also get a deal that is typically five percent either side of this depending, on the lender and the deal they are offering. However, for the better interest rates it is always preferable to be able to go lower in LTV and put in a higher buy to let deposit amount.
This can become an issue though if you are trying to increase the value after a purchase sufficient to remortgage and release all the capital you have put in to the purchase and repair of the property. For this purpose, the higher the LTV giving the lowest buy to let deposit, or equity requirement on a remortgage, is better.
In this case, you just need to make sure you can service the resulting mortgage payments with the rental income. The amount of the mortgage payments will likely be higher simply due to the higher lending amount. However, with the right property deal, a 75% LTV and 25% equity on remortgage can be made to work on interest-only mortgage payments, even for standard single-let properties.
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