How To Get A Mortgage For A Rental Property in Uganda
Want to purchase a rental property and need to raise funds in order to do so? How do you get a mortgage for a buy-to-let property in Uganda?
If you’re well prepared and work with the right professionals, obtaining lending and purchasing an investment property can be straight forward.
Before speaking to a bank about getting a mortgage for a rental property its sensible to be prepared; know your cash position and ensure your finances are in order to make you an attractive prospect for lending.
Cash deposit
The minimum deposit on buy-to-let mortgages is usually 20% of the property’s value although it can vary and maybe closer to 40%.
Not only will most lenders want to see that you have a good deposit amount they also want to see that you have additional cash to cover associated costs such as valuation fees. Each lender will have a different set of criteria, knowing what you have available in cash before speaking to a bank.
Credit history, home ownership and existing debt
Lenders will expect you to have an excellent credit rating if you’re looking at borrowing money to buy a rental property.
Owning a property whether it is with a residential mortgage or outright is often an important factor to lenders as crudely, you have collateral.
Lenders will also be checking over all your existing debt to ensure you aren’t to stretched with your current outgoings.
Income
Although banks tend to only lend on properties which have rental income in excess of the mortgage repayments they still require that you have a decent and steady income as an assurance on the mortgage.
As per the residential mortgage process, it is often the case that they look for a minimum term of employment at one company to show stability.
When getting a mortgage for rental property in Ugandam walking into your bank and simply asking for a buy-to-let mortgage won’t always mean you get the best possible loan. It is often the case that one broker will have special relationships with certain lenders and another broker might have better relationships with others which is why in some instances there is merit in having preliminary discussions with more than one mortgage broker.
Find investor friendly banks
There are certain banks who predominantly lend to investors and facilitate those beginning or building on their portfolios.
A good question to ask of a bank if you’re planning on building an investment property portfolio is: How many loans can you offer to one investor?
Equally, it is important to find a broker who is investment savvy as arranging financing with one who doesn’t have the experience or knowledge might mean your financing is not structured in the best way from the outset.
How much can you borrow?
The amount you can borrow to buy a rental property will be dependent on the cash deposit you have available and the expected rental income on a property.
Finding the right property
With so much of the lending requirement being based on a rental property’s performance finding the right property to buy is very important.
Once you have spoken with a broker or lender and have an idea of the figures that the property needs to achieve you can begin considering suitable properties.
Calculating rental yield
Rental yield is a percentage figure which demonstrates the return an investor is likely to achieve on a property via rental income.
The most simple way to establish the rental yield of a property is to use this calculation: (Annual rental income ÷ property purchase price) x 100 = % rental yield
Predicting rental income
A lender will want to see some proof that a property will meet the rental returns they require whether this be via indication from a local agent or comparable evidence. Another way to meet this criteria is to purchase a property that has an assured rental yield.
In short, a rental assurance means that the management company overseeing the rental property are so confident in the predicted yield that they are happy to cover any difference should they need to.
Many of the properties we advise our investors to purchase come with rental assurances in place.
