A buy-to-let mortgage in 8 steps

Keeping your savings at the bank will yield you very little at the moment as interest rates continue to fall. This has led to a growing number of people discovering that you can accrue capital by buying a property and letting it. First, though, you need to borrow money in order to get started. Are you interested in how that works? Michel Lindenburg, a business specialist at FinaForte, explains in eight steps how you can best arrange financing for this.

A buy-to-let mortgage works in a totally different way from a mortgage for your own home, because in this case you want to buy a second property and let it to someone else. This is viewed as a commercial investment or real estate investment. It means you can suddenly choose from a huge number of lenders: not just traditional banks, but also a range of alternative real estate companies.

How do I get the right buy-to-let mortgage from the right lender?
The right buy-to-let mortgage depends on the right terms and conditions. The problem is that terms and conditions for buy-to-let mortgages differ from lender to lender. That’s why it’s important that you choose the right one based on a thorough analysis. Only then can you find the best buy-to-let mortgage for you. Then you won’t have to worry about the mortgage structure after you’ve purchased your investment property and can immediately get down to letting it.

Step 1: know what you are buying (and where you are buying it)
What kind of buy-to-let property do you want? Make a list of all the important aspects that could affect rent, including any risks. Think about the type of property: will it be a luxury apartment, a holiday home, a high-rise flat or a studio? Is the property in a good state of repair? What is the risk of it standing vacant in this location? How much is the WOZ value? What about the rental value? Check rents on similar properties in the area to get an idea of rental value.

If you want to learn more about all the ins and outs of the investment property you’re thinking of buying, it’s a good idea to turn to Interhouse for help. Interhouse letting agents know all about the local rental market and can advise you properly on this.

Step 2: required return
If the investment property is within your budget and it looks like a good investment, think about the return you want to earn: do you want to arrange a relatively large buy-to-let mortgage with a higher return (leverage effect)? Or would you prefer to take out a relatively small mortgage with a higher rental income (cashflow)? In general the higher the return you want to earn, the higher the amount of risk you are exposed to.

Remember that each type of investment property involves its own target group and level of risk. This means that there may be a difference between your required return and the return that you actually earn via the property. Interhouse letting agents can offer you excellent advice on this too.

Step 3: decide on your financing strategy
You can calculate the maximum amount you can borrow to buy an investment property via the FinaForte website. Next you need to decide how much you want to borrow and how much of your own capital you want to put into it based on your required return. Consider how long you want to invest for and what your exit strategy will be if you decide you want to sell the property at a later date. Remember that buying an investment property without putting in any capital of your own is not possible at any real estate company. As a general rule: the more you can borrow, the less money of your own is required.

Do you want to know the maximum amount you can borrow and which type of buy-to-let mortgage is best for you based on your wishes and goals? Ask for a free appointment with one of FinaForte’s independent advisors. They specialise in buy-to-let mortgages and have a great deal of experience of investment properties and how to finance them.

Step 4: select buy-to-let lenders
Each real estate lender applies different terms and conditions to their buy-to-let mortgages. This may mean you can borrow less or it will cost you more. Make a shortlist of appropriate real estate companies by carefully reviewing the terms and conditions of their buy-to-let mortgages. In 2020 you can choose not just from traditional banks, but also from specialist real estate banks, private real estate investors and crowdfunding platforms.

Step 5: compare buy-to-let mortgages
Compare the acceptance conditions of the mortgages you have selected. At which real estate lender do you have the greatest chance of reaching a deal to buy a property to let? Traditional banks are generally cheaper, but they are also stricter than other lenders. You can always put in an offer on an investment property subject to being granted a mortgage.

In addition to the usual real estate lenders, FinaForte also has its own network of investors. As it offers you the choice out of all the banks and alternative real estate companies, its advisors are 100% independent. They are familiar with the terms and conditions of each lender and can help you select and compare buy-to-let lenders.

Step 6: apply for a mortgage
Once you know which buy-to-let mortgage suits you best, you can apply for it. Ensure a smooth mortgage application process by submitting your completed application in digital form (PDF). Make sure you start preparing this process in good time! Remember to initiate your mortgage application process only after your offer on the investment property has been accepted.

FinaForte can assist you throughout the entire mortgage application process: from your first investment property right up to the appointment with the notary. In this case, your advisor will also apply for your mortgage on your behalf and ensure that your application is completely in order for the lender.

Step 7: have the property valued
Have the property valued by an appraiser approved by the real estate lender. The report needs to give the ultimate let market value of the property that you wish to let. Remember that the let market value is often lower than the non-let value. Buy-to-let lenders only look at the let market value when they lend you money to buy a property. FinaForte will compare buy-to-let mortgages for you that start as low as €50,000 and rise to a maximum of 90% of the let market value.

Step 8: signing the contract at the notary and letting the property
Has your mortgage application been approved? Congratulations! Once you’ve signed the mortgage papers, the keys and the property are yours. Now you can set to work. Avoid letting your property to the ‘wrong’ type of tenant via an incorrect tenancy agreement! This can cause you major problems, as we have all kinds of laws to protect tenants in the Netherlands. It’s therefore important that you let your property to a properly-screened tenant at the best-possible rent and using a water-tight tenancy agreement. Yet this is a specialist area.

The expertise and wide reach of a high-quality letting agent are essential to enjoying a carefree and sound return on your property. We therefore recommend leaving all this to Interhouse letting agents. With over 25 years’ in the industry and offices throughout the Netherlands they are experts at property rentals in all segments. It’s also worth remembering that high-quality (expat) tenants or multinationals in principle only rent from reputable letting agents such as Interhouse.

Quickly find the best buy-to-let mortgage for you!
Now that you’ve read all the steps, you have a good idea of how to successfully finance a buy-to-let property. So what are you waiting for? Time to get your mortgage application process rolling! This starts with finding out which financial options are open to you. Get in touch with FinaForte by requesting a free appointment online or phoning us directly on 085-0074080. Our real estate specialists possess a huge amount of experience and specialist knowledge of buy-to-let mortgages, as well as a large network of real estate lenders, so they provide your best chance of finding the most appropriate buy-to-let mortgage for you at the best rates and terms and conditions.

Do you still have questions after reading this article? Don’t hesitate to send me an E-mail at: michel@finaforte.nl

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