Property purchase funding options

Although, in some cases, high street lenders can be competitive. Your best option is to go through a mortgage broker/independent mortgage advisor or IFA. All IFAs are regulated by the Financial Services Authority and should only talk to you about products upon completion of a fact finding questionnaire, thus enabling them to find the best product to match your requirements.
 
In many cases a "Buy to Let" mortgage will be proposed. According to simplicityfinancial.com "the majority of investors use this as the optimum way of funding". This is how it works - the lender will require a deposit between 15 -20% of the property value with the remaining balance payable over a typical mortgage term (say 25 years); and just like a domestic mortgage you can have a repayment or interest only payment profile.

Some of the most popular schemes are called Self Cert, which in English means you will not have to provide proof of income, therefore it is self certification. They were originally structured for self employed people who may not have a regular or guaranteed form of income. The only negative to self cert is that the borrowing rate is always slightly higher, typically around 0.5% flat.
 
The lender will need to see that your rent will cover at least 125% of your mortgage payment, so bear this in mind when setting your budget by reviewing the rental vs. mortgage ratio. Ask yourself what can you get for your money and more importantly what is the rental potential?
 
Typical Example: Based on a repayment mortgage over a 25 year term with a flat rate of 5.00%
 
Purchase Price: £70,000
Typical Deposit: £10,500
Amount of Loan: £59,500
 
Monthly Mortgage payment: £347.00
Monthly Rental potential: £500.00
Lender requirement 125%: £433.75
 
Just like domestic funding you can choose between a fixed, flexible or tracker style mortgage but always read the small print as sometimes the lowest fixed rate can equal the highest redemption penalty or period, meaning where you gain front end you may lose back end!
 
The above is for example purposes only and is not a quotation. If you are looking for professional advice or a quotation please contact a qualified independent financial advisor. Hope this clarifies funding for you.