MORTGAGES
BUY TO LET
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Your property may be repossessed if you do not keep up repayments on your mortgage.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.
Buy To Let mortgages, putting you in the know
When you want to buy a residential property to rent out for profit, you will need to apply for a Buy to Let mortgage. Properties with a Buy to Let mortgage in place can not legally be used as your own residence. However, where you already own a residential property and wish to start letting it out to tenants, you can sometimes request to change your mortgage to Buy to Let with your existing lender gaining consent to let the property depending on your terms or remortgage the property onto a new Buy To Let mortgage.
Who can get a Buy to Let Mortgage?
In order to obtain a Buy to Let mortgage, you will ordinarily have to fulfil the following criteria:
- In most cases you will already need to be a homeowner (having an active residential mortgage is fine)
- Some lenders may require you to meet a minimum salary requirement, usually around £25k.
- Most lenders will be looking for a strong credit score
- Lenders usually require a 20% deposit as a minimum.
How does a Buy to Let mortgage differ from a standard residential mortgage?
A Buy to Let mortgage differs from a traditional residential mortgage in a number of ways, beyond the additional acceptance criteria. For example, they tend to have a higher deposit requirement of 20+%.
The application fees and mortgage interest rates are also higher than on a standard residential mortgage. As most Buy to Let mortgages are taken on an interest only basis, the monthly repayments will often be much lower, offering some balance. The lump sum of your loan will then be paid at the end of the mortgage term, often utilising the sale of the property.
It should be noted that some Buy to Let mortgages are not regulated by the Financial Conduct Authority (FCA) unless you buy a property expressly to let it to close family members.
How much can you borrow on a Buy to Let Mortgage?
Another way that a Buy to Let mortgage differs is in how the lender calculates your loan amount. Unlike other mortgage types, which are based predominantly on affordability, the amount you can borrow is based on your potential rental yield (income from the rental achieved from the property).
This means that lenders will pay close attention to your choice in property, which they will usually be looking to produce a rental yield to cover your monthly mortgage payments, based on a higher stress-tested rate and a lender specific margin. Therefore, the amount you can borrow will be based largely on the rentability of your chosen property.
Planning for when no rent is coming in
A Buy to Let property can be a great way to bring in a stable monthly income. When planning to apply for a mortgage, however, it’s important to consider periods of vacancy. All rental properties will be empty at some stage, whether it’s during renovation or as a result of a slow local market.
As you’ll still need to meet your mortgage repayment whilst your property is vacant, it’s a good idea to look for a high-end rental protection policy. This type of insurance often covers a lack of rental income resulting from a variety of circumstances.
Don’t rely entirely on a property sale to finalise the mortgage
It’s standard practice for landlords to sell their Buy to Let mortgage at the end of the mortgage term, in order to pay off the final lump sum. Whilst this can be profitable in some cases, there are many situations where this is not an option.
Having a backup plan to cover the lump sum in the event of a drop in house prices, for example, could help you find extra funds where the sale amount is too low.
The tax implications and advantages of a Buy to Let Property
There are many tax implications to consider before applying for a Buy to Let mortgage:
- There is a 3% additional stamp duty requirement on Buy to Let properties
- Income tax is payable on rental income
- Both capital gains and income tax are payable on the proceeds of sale when you sell the property.
With regards to the income tax owed, there may be some property associated costs you can offset against your income tax liability, but we would recommend speaking to a qualified accountant or tax adviser for personalised advice on this.
Are there any differences when you apply for a Buy to Let Mortgage as a Limited Company?
A Buy to Let mortgage is available to both individual landlords and Limited Company owners. In order to apply for a mortgage through a limited company, lenders will usually require that you use a Special Purpose Vehicle.
Special Purpose Vehicles
A Special Purpose Vehicle (SPV) is a type of limited company that is set up specifically for the purpose of buying property. This is easy to set up by both individuals and existing Limited Companies. There are benefits and drawbacks to using a Special Purpose Vehicle:
Benefits:
No limit on the number of properties owned, allowing portfolio landlords better opportunities to expand
- Stress tests are more relaxed, so mortgages can be easier to obtain
- Some lenders will consider personal income alongside potential rental yield in their loan calculation
- Certain tax benefits (see below*)
*There are different tax rules applied to Buy to Let income depending on whether you are trading as an individual landlord or a limited company.It’s worth considering which method of application will be more beneficial to your long term earning ability prior to application. We recommend speaking to a qualified tax professional for further advice.
Drawbacks:
- They can be more expensive to arrange
- More detailed and complex application process
- Fewer choices of mortgage lender (although this is gaining popularity)
- The director of the Limited Company will need to provide a personal guarantee on the mortgage
Your home/property may be repossessed if you do not keep up repayments on your mortgage.
Some Buy-To-Let Mortgages are not regulated by the Financial Conduct Authority.
Happy Clients
Sharmila Rumpa2024-05-28Excellent and professional service, wanted to call out Bhavna Gover especially, she helped me to sort out a Ltd Company buy to let mortgage. She's very thorough in her work. Please ask for Bhavna if you need a mortgage in future, she will be happy to help for sure.
Kash Anis2024-05-23We approached Mortgage matchmakers regarding to get an options as we alreday tried few brokers before.Mohit introduced Bhavna which helped us out through out our journey.We felt it was difficult as our situation was bit tricky, but Bhavna worked out the best resoultion and sort this out. We have no words to say thank you, as it was amazing support from Bhavna and got the mortgage offer. Bhavna was fantastic,friendly and very passionate person, she is very professional Mortgage Advisor. Once again I would like to say Thanks so much for helping through out my journey to get mortgage for my new house.
Larushhh O2024-05-18It was a pleasure working with Paul over the last few months with my remortgage. He took away the stress of remortgaging with his professionalism and patience till the deal was finalised. I highly recommend him as a broker. Thanks for your support and help once again.
Aromes Bienmaison2024-05-15Paul was very helpful and provided a great guidance throughout the whole process
Shalaka2024-05-14We couldn't have asked for a better mortgage advisor! Mohit has been an absolute asset, always there when we had a question, and believe me, we had plenty! Being first-time buyers, his guidance was invaluable. What we appreciated most was his honesty and the fact that he never made us feel rushed into any decision. We're still in the process, but we already feel confident with his support. Totally recommend him to anyone in need of mortgage advice!
Dinesh Johnson2024-05-13Mohit was simply brilliant and helped us to understand all the options available in the market and choosing the best and importantly the right product for our need. Mohit is very efficient, he goes out of his way to help his clients and keep his client’s interest at top of his priorities. He was very professional and knowledgeable, would certainly don’t think twice to get his service in the future. I would highly recommend him to anyone who needs advice and support in sorting their mortgages. Thank you soo much Mohit for your hard work and support in sorting our both residential and BTL mortgages! Tharaka & Dinesh
Bagya P2024-04-30If anyone looking for hassle-free mortgage process, then I would suggest to discuss with Mohit. Mohit explained the process more in detail, assessed the situation very well and gave perfect suggestions to get the process done. Also, he closely connected with Solicitor and made the whole process easy. Additionally, I would like to thank Bhavana for her exceptional work. She tried many options to get the better deal from different Vendors. She explained all my queries on time and appreciate her professionalism. Thanks a lot once again Mohit and Bhavana for all your support.
Oliver Harris2024-04-24Mohit was a great help with finding my first mortgage. He talked through all options clearly and found the best deal to suit my needs. I'd thoroughly recommend using his services.
Veronica Ihonor2024-03-03The team was very professional with spontaneous delivery in line with agreement. Well done guys
Ogechi Eke2024-01-14If you’re looking for a professional mortgage broker who actually goes above and beyond his role then look no further. Ankur Daru is your main man. He is extremely helpful and knowledgeable. Even when the interest rate dropped for my lender, without prompting, he sent me an updated deed. There are so much more I could write but I’ll sum him up in a few words: Professional, knowledgeable and helpful. Thank you for securing the deal for me Ankur! I look forward to the next one! Ogechi