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Buy To Let Mortgages

Getting the right buy-to-let mortgage will ensure that you get the most appropriate deal for you and your investment.

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A buy to let mortgage is designed to support the purchase of a property to rent it out. Buy to let properties can vary from houses and flats to house share arrangements. Similarly, the types of landlord that chose to apply for a buy to let mortgage – and who the lender decides is eligible – do vary also vary. Both those that own one property and those that own a number of properties may be eligible for a buy to let mortgage.

The rules and regulations regarding buy to let mortgages are set out by the Prudential Regulatory Authority of the Bank of England, who regulate the majority of lenders that offer buy to let mortgages. These rules have changed substantially in recent years, and therefore obtaining the correct advice from an experienced broker in this complicated market is of enormous importance.

Buy To Let Mortgage Calculator

See How Much You Can Borrow

Use our buy to let calculator to get an indication of the buy to let mortgage that you could achieve. This interactive facility gives you the chance to understand not only the amount you could borrow, but how other factors – such as the rent received, your tax bracket, duration of a fixed rate deal etc – will impact this figure.

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Best Buy To Let Mortgage Deals

As with all types of mortgages, the best deals and rates available differ based upon individual circumstances, lender’s criteria and the type of property in question. It is not uncommon, however, for buy to let mortgages to be available with an interest rate available between 1% and 2%.

Depending upon the size of the loan it may be more appropriate to select a deal with a higher interest rate, in order to reduce the amount of fees charged, such as arrangement fees, booking fees and valuation fees.

Buy To Let Mortgage Brokers

The benefits of using an experienced buy to let mortgage broker are numerous. With such a vast marketplace it can be difficult to know where to start. Nowadays, because lenders’ criteria is so complex and varied, there is no such thing as an “easy case”, and what one lender deems as being “bad risk”, another will gladly accept.

Our in-depth knowledge will navigate this difficult market and also find the cheapest, most appropriate deal which can save hundreds if not thousands of pounds.

Buy To Let Remortgage

Buy to let mortgages are no different to residential mortgages, in that most deals offer an initial interest rate which expires after a certain period of time. An example of this is fixed rates, which often differ in length from 1–10 years. At the end of these deals you will usually automatically revert to a higher rate, such as the lenders standard variable rate, at which point the monthly payment would increase (often dramatically).

Remortgaging prior to the end of the deal ensures you remain on the most suitable and cost-effective deal available. A new lender will often pay for associated costs, such as a property valuation and legal fees, and remortgaging can also provide an ideal opportunity to raise extra money for a variety of purposes, such as:

  • Consolidating debts
  • Carrying out home improvements
  • Providing the deposit for a further buy to let property purchase

Buy To Let For First Time Buyers

Whilst many lenders will only provide a buy to let mortgage to customers who are existing homeowners (such as residential property owners, existing buy to let landlords), there are lenders who will consider lending to first time buyers. This is often in circumstances where an individual has access to a large sum of money and wishes to invest this into property, but may not wish to live in the property. This could also be for younger borrowers who have substantial funds from savings or inheritance, but are not ready to leave the family home. Alternatively, those in tied accommodation (where accommodation is provided as part of employment) may wish to get onto the property ladder. Criteria may differ from more “traditional” buy to let circumstances, but a brokers’ experience and expertise can help to find the right solution.

Bad Credit & Buy To Let Mortgages

Bad credit (sometimes called adverse credit) takes many forms, such as late payments on credit commitments – such as loans, credit cards and mortgages – along with more serious circumstances, such as defaults, county court judgements, individual voluntary arrangements (IVA’s), debt management plans (DMP’s), bankruptcies and repossessions.

For borrowers who have had an imperfect credit history, the buy to let market can seem an impossibly daunting proposition. There are, however, a growing number of lenders who will lend to borrowers who have had some form of credit problem in the past.  The individual circumstances will be of key importance, such as the size of the debt involved, the seriousness of the problem and the time that elapsed since the problem occurred. A specialist lender may charge a higher interest rate and/or fee due to the complex circumstances, but often this type of arrangement can be used to help repair an applicant’s credit history in order to return to a mainstream, high street lender in the future.

Buy To Let Mortgages for Limited Companies

Due in part to recent taxation changes, a growing number of applicants are opting to purchase a buy to let mortgage for a special purpose vehicle, like a limited company. Simply put, an individual incorporates a company specifically for the purpose of purchasing and then renting out a property. There can be numerous reasons for doing this, often for mitigating taxes such as income tax or inheritance tax. You should always seek advice from a specialist tax adviser to see if this is the right option to take, but if it is then there are an increasing amount of lenders who will consider offering a mortgage to a limited company rather than in a personal name.

Mortgages for Houses in Multiple Occupation (HMO Mortgages)

Unlike typical situations where a single tenancy agreement is in place for one household, HMO’s are properties where at least three unrelated people rent a bedroom in a property and share common facilities such as the kitchen, bathrooms and living rooms. Often found in larger cities or with student lets, the combined rent received is often much higher than would be available with a single household. Additionally, the individual rent paid by each tenant is often lower than would be the case than if they were not sharing common areas. Whilst many lenders are unwilling to offer HMO mortgages, there are lenders who, under the right circumstances, will consider lending to the right applicant.

Mortgages for Portfolio Landlords

Portfolio landlords are defined by the Prudential Regulatory Authority as being borrowers with four or more mortgaged buy to let properties. For these types of borrowers, additional checks have been put in place which are designed to ensure a borrower’s financial situation is suitably stable. This takes into consideration a number of factors, not just in relation to a borrower’s personal income and expenditure, but also the details of the borrower’s existing property portfolio, including:

  • Overall experience as a landlord
  • The total rents being received
  • Mortgage payments payable
  • Cash flow from a portfolio

As a result of this additional complexity, a number of lenders took the decision to not lend to those considered as portfolio landlords. Of those lenders that do offer mortgages to portfolio landlords, the relevant rules are interpreted in different ways.  This can make it difficult to match the applicant to the right lender, hence highlighting the need for expert advice.

Let’s Get Started

Get in touch with your local branch and speak to one of our experienced advisers. They will be more than happy to go over all of the above and more. Buy-to-let doesn’t have to be complicated. Let us do the hard work for you.

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FAQs about Buy To Let Mortgages

  • What are the lending conditions?
  • Can I afford a buy-to-let mortgage?
  • Interest-only or repayment mortgage?
  • How to find the right plan for you...
  • Which lenders offer buy to let mortgages?
  • Who can get a buy to let mortgage?
  • Are buy to let mortgages more expensive?
  • How much deposit will I need to provide?
  • How much can I borrow?

While conventional mortgage lenders will want to check the affordability of the repayments, a buy-to-let mortgage can come with a number of other conditions:

Minimum valuation – Some lenders will only be willing to agree a mortgage on properties valued above a certain level. Some stipulate valuations of £100,000 plus, while others will be happy with £40,000 or £50,000.

Property type – Some lenders are wary of properties that have an unusual construction. Properties like log cabins, period buildings or converted windmills could cause problems with mainstream lenders, but shop around because there will be a lender out there that is willing to offer you a mortgage.

Property portfolios – Buy-to-let lenders can restrict the number of properties you can have on one buy-to-let mortgage, while others might not like if you have multiple properties in the same area. Some lenders can also place a limit on the number of mortgages they are willing to agree with a single investor. However, there is a solution out there, it’s all about knowing where to look.

Age – If you’re looking to invest in a buy-to-let property to provide you with an income in retirement, by aware that some lenders will limit the mortgage term by age, so bear that in mind when searching for the right deal.

The affordability of a buy-to-let mortgage is not simply a case of balancing the rental income against the mortgage repayments. There are also a number of other costs of owning a buy-to-let property, and although almost all of these expenses are tax deductible, they are still costs you will have to pay in the first instance.

When considering the affordability of a buy-to-let mortgage, think about:

  • Letting agent fees
  • Maintenance costs
  • Annual safety checks
  • Buildings and landlord insurance
  • Ground rents and service charges
  • Repair work
  • Property improvements
  • And many more…

Although the lender may not take these additional costs into account, it’s essential you do.

The decision about your buy-to-let mortgage repayment strategy should be aligned to your particular investment goals. If you’re looking to supplement a pension or perhaps build a small portfolio of properties, the repayment route will ensure that at the end of the mortgage’s term, the loan has been repaid so you’re not left with any nasty bills.

Interest-only mortgages are usually more popular amongst professional landlords with multiple properties. This allows them to continually expand their portfolio thanks to the greater level of cashflow the smaller repayments allow them to have. At the end of the mortgage’s term, the property can be sold to repay the initial sum.

Different mortgage lenders have different terms, and we’re constantly working with the market to know what could be the most favourable deal in your particular circumstances. Your plan might work best with a fixed interest rate, or maybe a variable tracker. And of course we have to balance introductory rates and the arrangement fees. In the end, we will find the right fit.

The buy to let lending market is a mixture of well-known high street lenders (such as NatWest, Barclays, Santander and more) plus specialist buy to let lenders (the largest being BM Solutions and The Mortgage Works). Many of the specialist lenders are part of much larger organisations, with BM Solutions being part of the Lloyds Banking Group and The Mortgage Works part of Nationwide Building Society. The result of such a diverse market is a wide range of available products designed to meet the requirements of a variety of situations.

The availability of a buy to let mortgage depends upon a number of factors, all of which then depend upon the lender in question. Some lenders prefer to lend to applicants with previous letting experience, others specialise in lending to those who are starting off as a property landlord. As such, there is always a lender out there to support a wide range of customers.

Because buy to let mortgages are provided for a property which is not the applicant’s main residence, the interest rate and/or fee charged will tend to be slightly higher than for a standard residential mortgage. However, unlike with residential mortgages, it is not uncommon for these to be offered on an interest only basis, where the capital balance doesn’t decrease over the term of the mortgage. The rationale for offering an interest only mortgage on a buy to let basis is that the property could be sold at any point to repay the outstanding debt without impacting upon the applicant’s own housing requirements. Therefore, the monthly payments for a buy to let mortgage are often lower than for a residential mortgage.

Buy to let mortgages typically require a larger deposit than that of a residential mortgage. This is usually a minimum of 20% of the purchase price, although most lenders would require a larger deposit (often 25% – 30%) to be put down.

This is the one area in which lenders can substantially differ. Many lenders base the maximum loan purely on a calculation, which centres around the amount of rent that the property does/will achieve. Other lenders place a larger emphasis on the applicants income and expenditure, with a calculation of disposable income being used to establish the maximum loan available.

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