BUY-TO-LET MORTGAGES

Buy-To-Let Mortgage Advisors

Buy to let mortgages changed when the government introduced higher stamp duty for additional properties and changes in the tax laws. This was to slow down landlords purchasing properties. The demand for rental properties continues to be high and therefore buy to let properties are still perceived as an attractive and exciting investment.
We offer specialist advice for buy to let mortgages. Our advisors & the brokers we work with understand how to release the full potential from your property. This includes looking at what your long-term goals are and what you want to achieve from each property.

Get in touch today by filling out an enquiry form online or by calling us on 0300 124 5565

What is a buy to let mortgage?

buy to let mortgage advice

A buy to let mortgage is when you purchase a property to rent out to tenants and thus the purchaser becomes a landlord. The main aim is to rent out the property to make a profit. With buy to let mortgages, the landlord isn’t allowed to reside in the property.

Most landlords take out buy to let properties on an interest-only basis and use the rental generated as an income, this also helps with affordability if for some reason the property isn’t rented out, as the monthly cost is lower than a repayment mortgage. This isn’t always the case, some landlords with numerous properties will have some on a repayment method.

 

How do I get a buy to let mortgage?

There are several factors which will affect any buy to let mortgage application:

  • Age limits – The minimum age is usually 18, however, this does vary from lender to lender
  • Income – Some lenders have a minimum income level
  • Rental income – Must pass the lenders rental cover (stress test)
  • Deposit – Minimum 15% deposit, ideally 25% will give you the best options
  • Credit profile – The cleaner your profile, the better the rates and options available

 

How are buy to let mortgages assessed?

Lenders assess borrowing on the properties current/anticipated rental income – how much rental income can be generated from the property – this will affect how much the lender will potentially lend. Some lenders will allow “Top Slicing” – this is when the rental received isn’t enough to get the desired loan amount, and they look at personal affordability to assess if you have enough disposal income to cover any shortfalls that should arise from scenarios such as the property not being let out. Most lender will lend more on a 5-year fixed rate than they will on a 2-year fixed rate due to how the stress tests are conducted.

 

Does my income affect me getting a buy to let mortgage?

Some lenders have a minimum income for buy to let mortgages, this typical ranges from 20-25K, and this is more common if the applicant is a first-time landlord.

Experienced landlords (usually classed as someone who has 6-12 months landlord experience) can obtain mortgages with no income, this will ultimately depend on the rental income of the property and the applicants credit profile.

 

How much deposit will I need for my buy to let mortgage?

The minimum deposit you will need is 15%. There are a small number of lenders working in this area and the rates are higher to reflect the extra risk involved, the market opens more at 20% deposit, and at 25% deposit the whole of the market becomes open to you. Each lender has a minimum property value, and this can vary greatly. This is where your mortgage expert will be able to save you time and money and give you all the information needed.

 

What are the costs involved in purchasing a buy to let?

Each case and lender are different, but potential costs to consider are:

  • Broker fees – Depending on the complexity of the case
  • Lender application fees – Some lenders charge a fee to submit the mortgage application
  • Lender arrangement fees – Some have no fees, while some work on a percentage of the loan amount
  • Valuation fees – To have the property valued
  • Management fees for the property – If you are letting out the property through an agent
  • Stamp duty – Extra stamp duty is now payable on 2nd properties, check the government website for exact details https://www.gov.uk/stamp-duty-land-tax

 

Can I get a buy to let mortgage with bad credit?

There are a few lenders in the market who will potentially lend to people with previous bad credit. This is an area where your mortgage expert will be able to place you with the best lender for your circumstance, they will go through your credit report and be able to see exactly what the issues have been and place you accordingly.

The interest rates for bad credit mortgages will be higher, interest rates are always reflective of risk. With being a higher rate, this can sometimes mean the rent doesn’t meet the lenders stress test. This can normally be resolved if taking a 5-year fixed product, or if they allow top slicing which takes into account your earned income.

 

Can I get a buy to let mortgage through a limited company?

Yes. This can either be through an existing limited company or setting up with the sole purpose of buying and renting properties. This is a specialised area of lending and your advisor will be able to run through all the options available on your enquiry, including the SIC codes needed to set the company up correctly.

Before proceeding with any mortgage application, it is vital to arrange a meeting with a tax specialist to discuss your situation, they will then advise on the most tax-efficient way for you.

The buy to let mortgage market is complicated, and you need the guidance of a mortgage expert to make sure you are getting the best advice for your circumstances.

Call us on 0300 124 5655 to speak to an expert.

 

What are buy to let rental returns?

This is the return on the rent vs the mortgage. If rent received was the same as the interest rate payment that would be 100%. If the rent received was £600 and mortgage payment was £300 this would be 200% rental return.

Lenders will want the rental return to me a minimum of 125% and as ahigh as 145%. This will depend on the mortgage deal you have with them.

 

What is a buy to let stress test?

This is the way lenders assess how viable the buy to let property is. The stress test is a way to check the property rental will be able to cover the interest.

For example, you have a £100,000 mortgage and your interest rate is 3.5%, your monthly interest only repayment will be £291.66 per month.

Some lenders use a stress test of 125% or 145% depending on the lender

£291.66 x 125% = £364.58 – Minimum rental amount

£291.66 x 145% = £422.90 – Minimum rental amount

While the above example uses the actual interest rate of the product for the rental calculation, some lenders will use a standard variable or predetermined interest rate to stress test (typically between 5.0%-5.5%) which will further affect borrowing.

 

What’s the best mortgage for my buy to let?

There is no best mortgage for a buy to let. The mortgage you need will be down to your individual circumstances, preferences and long-term goals. There are a wide variety of options available and your mortgage expert will be able to advise accordingly once they know your full circumstances.

 

Should I have an interest-only or repayment buy to let mortgage?

Most landlords will opt for an interest only mortgage. The reason is, you will receive more of the rental income for yourself because the interest only mortgage will be cheaper.

The danger with any interest only mortgage is that you will still be liable for the full balance plus any fees added to the loan when the mortgage term ends.

If you opt for a repayment mortgage, you will be paying back the Interest along with making capital repayments. This means your monthly mortgage payment will be higher but, you will own the property once the mortgage term ends.

There is no right or wrong way, whichever way you choose will be down to your own preferences. Some landlords will choose interest only mortgages and make over-payments (reducing the mortgage balance) when the property is rented. If the property is then not rented out, they are only paying the interest element. This is a midway between the two options.

If a landlord owns multiple buy to let properties, they will have some properties on interest only and some on repayment. These are called portfolio landlords and extra care needs to be taken when placing portfolio landlords. Some lenders have a limit on the amount of properties that one landlord can have mortgages on.

This is a very specialised area of lending. Call us on 0300 124 5655 to speak to an expert.

 

How do I make a buy to let mortgage application?

When looking to apply for a buy to let mortgage, it is important to understand what the lender will be looking at to assess if you can afford the mortgage:

  • Expected rental income
  • Personal income
  • Type of buy to let property
  • Any additional costs related with letting the property
  • Rental income will be to be a minimum 125% of the mortgage repayment. Importantly, this will be verified by a surveyor who will value the property and looks at the rental figures in the area.

If this isn’t the case and the lender will allow “top slicing” then they will look into your personal disposable income.

Credit history will also play a part. They will look at current debt levels, payment history and if there is any bad credit on your credit file.

The amount of deposit you have will influence the interest rate offered by the lender. The lower the interest rate, the lower the monthly mortgage payment. The higher the deposit the less perceived risk you will be to the buy to let mortgage lender.

 

Why are buy to let mortgages more expensive?

There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or can’t borrow what they need – just because one lender has declined you, don’t give up.

Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.

The expert brokers we work with have experience in dealing with all aspects of self-employed mortgages, and importantly using the whole of the market to access the very best deals available.

To find out how we can help call us on 0300 124 5655 or complete our quick enquiry form to speak to a mortgage expert.

 

Can I rent my property out without a buy to let mortgage?

You can rent your property out if you have the permission from your current lender, this is known as consent to let.

This can happen if you meet a new partner and move in together and are currently in a fixed-rate mortgage deal. The mortgage lender may charge you a fee and may alter the interest rate. If in doubt always speak to your lender directly.

 

Can a British ex-pat get a buy to let mortgage?

If you’re an expat currently living abroad there are buy to let mortgages which could be available to you. There are more obstacles and you will need the assistance of a mortgage expert.

If you already own a property in the UK, then there will be more options available. This is such a niche area of lending with very few lenders looking for this type of business.

The mortgage experts we work with will be able to give you the most up to date information. Call us on 0300 124 5655 or complete our quick enquiry form if you would like to discuss ex-pat mortgages with one of our mortgage experts.

 

Can I get a buy to let mortgage with Help to Buy?

No. The government Help to Buy scheme was designed to get people on the property ladder and can’t be used for buy to let purposes.

If you have the property and your situation changes before you do anything, we advise you to contact your local Help to Buy provider and discuss your situation directly with them.

 

Can I get a buy to let property at auction?

Buying a property at auction can very often be cheaper. You should still perform all your due diligence before agreeing to any purchase at auction.

As a rule, you will need to put a minimum of 10% of the property value on the day and have between 14-28 days to complete the purchase.

If the property isn’t habitable then you will need to look at bridging finance options – more details of which can be found here.

 

Speak to a buy to let mortgage expert

The buy to let mortgage market is complex and requires a broker who knows the market and how to get you the most out of each mortgage deal.

All the experts we work with are whole of market brokers with the experience to ensure you receive the best customer service and the best mortgage deal possible.

To discuss your options call us on 0300 124 5655 or complete our quick enquiry form online.

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