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
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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

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Based on 154 reviews
barbara kisolo
barbara kisolo
02/10/2023
I was introduced to Mortgage Matchmakers Limited by a friend who had used them before. From the moment we contacted Paul, he walked the journey with us until exchange of contracts. Paul was reachable 7 days a week and would answer his calls even outside the normal working hours. He was constantly updating and advising us on each step of the way including engaging the solicitor severally when things stalled. He provided useful advice whenever we felt like giving up. The fee was far less than what these guys offer and Paul was so patient with us. We are glad we chose Mortgage Matchmakers. Thank you so much Paul. We can't thank you enough.
Suman Pandey
Suman Pandey
19/09/2023
I cannot express enough how grateful my family and I are for the exceptional service provided by Bhavna Grover during our mortgage approval process. In just two short days, Bhavna worked tirelessly to help us secure our mortgage, and her dedication and expertise were truly outstanding. What truly sets Bhavna apart is her unwavering support and her wealth of knowledge in the field. She patiently and thoroughly explained every aspect of the mortgage application process, providing us with invaluable advice that allowed us to make informed decisions. Bhavna's friendly and easy-going demeanor made the entire process feel seamless, and we genuinely enjoyed working with her. Throughout our interactions, Bhavna demonstrated a high level of professionalism and competence. But beyond her professionalism, Bhavna's personal touch was what made our experience truly exceptional. She made us feel comfortable, and her ability to explain complex concepts in a language we could easily understand was greatly appreciated. She was not just a mortgage expert but also a trusted advisor and friend. Thank you, Bhavna Grover, for going above and beyond to help us achieve our mortgage goals.
Chetna
Chetna
06/09/2023
Fantastic service! Mohit and Bhavna were super efficient & quick - more importantly, they were able to get me a great mortgage rate. I loved that they were so responsive and I was able to call/message anytime and they would respond almost immediately. I'm so happy with their service and would highly recommend them!
Tim Bashforth
Tim Bashforth
17/08/2023
If I may start by saying I never leave reviews but in this instance I felt compelled to. As this was my first time getting a mortgage it felt quite daunting but from the first time speaking to Mohit he put my mind at rest and talked me through the process. When I had concerns or questions he was just a phone call away to give an answer and was always happy to help even after three calls in a row when I had forgotten some of my questions. He made the process of getting my mortgage a stress free experience and I would strongly recommend Mortgage Matchmakers to everyone. To be honest five stars just isn't enough! my experience couldn't have been any better, if you are looking for a mortgage adviser look no further and give them a call, you won't be disappointed.
Ayan Sengupta
Ayan Sengupta
10/08/2023
Very informative discussion with Mortgage Matchmakers. Mohit is really helpful and willing to go the extra mile in assisting clients depending on their circumstances.
Diana Terence
Diana Terence
24/07/2023
Mohit thank you for sorting our buy to let mortgage. You've been excellent in giving us good options and advise on terms. Thanks again
Kam Zaman
Kam Zaman
09/07/2023
Paul Asare was fantastic he kept me updated all the time and explained things clearly. I’d recommend this company a lot they were great and gave me the best deal.
Emi
Emi
08/07/2023
I remember 2 years ago I was in a difficult situation in my life and I was looking for a good mortgage advisor. I searched online and Mohit's name came up. I read all his reviews and decided to give him a chance. So we met and OMG, Mohit is such a warm person with such a positive attitude, he told me all the possible options that I had and advised me the best choices for me. But unfortunately things went wrong in my personal life, so I didn't contact Mohit for another 2 years . After 2 years I was afraid to call him again and ask for help with my mortgage (because of last time) but Mohit helped me out again and he was so polite and professional. He tried his best, he was always in contact with me and I had my mortgage offer within a week !!!!!!! Honestly I am so happy I returned to Mohit, he helped me with everything, advice on things and I finally got my mortgage with my name only and it only took him a week! I really couldn't believe things happened so quick 😊 Mohit did something which other brokers couldn't ! I've been told I can't get a mortgage on my own but here I am and I got one with Mohit's help 😊 I will always recommend Mohit to my friends if they need help with their mortgages. Thank you Mohit for everything 🙏
Anthya Fernandes
Anthya Fernandes
12/06/2023
Mohit and Bhavna has been a huge help in my buying process. As a first time buyer and with rates changing all the time due to the economic uncertainty, I've been more than a little out of my depth, and Mohit and Bhavna has done a fantastic job of making the entire process simple to understand, straightforward, and stress-free. For the peace of mind that has given me alone, I could not recommend them highly enough.
Jaideep Pathak
Jaideep Pathak
11/06/2023
Mohit has been extremely professional, responsive and quick in helping me find a great offer. The entire process was seamless and I was surprised how quickly I managed to get an offer. Mohit cares for his clients and patiently addresses all questions. I would highly recommend his services.