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Buy to Let Mortgage Advice

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Hundreds of landlords, just like you, have found the right mortgage package with our help. In addition to mortgages, we can help protect your investment and your rental income with the correct insurance.

What is a Buy to Let mortgage?

A buy to let mortgage is where a customer borrows money to buy a property to rent out and generate income. Lots of lenders offer buy to let mortgages and it can be a good investment. Buy to let mortgages typically have a higher rate than a traditional mortgages as they are considers to carry more risk. You can however get some great rates when you compare the whole of the market.

Buy to let mortgage affordability

Making sure that customers can afford their mortgage is of the upmost importance to potential lenders, they want to ensure that they will get there money back plus the interest. Lenders don’t want to have to reposes properties to recoup their money. Each lenders has different criteria for lending for buy to let mortgages. Some want to see a personal income over £25,000 and some will be happy if the rent payments will cover the mortgage repayments by 125%.

Buy to let mortgage deposit

When taking out a buy to let mortgages lenders will need a higher deposit than a typical residential mortgage, this is due to the added risk of these kinds of mortgages. You can expect to need at least 25% of the property value to but done. Higher deposits will help to get even better rates which will allow you to pay less interest and make more profit on your buy to let. Some lenders will allow you to use any existing equity in other property as your deposit.

Maximum Loan to Value on buy to let property

In the buy to let market we are still seeing a maximum loan to value of 80% but more typically 75%. This means that you will require at least a deposit of 20% to secure a buy to let mortgage. Some lenders will allow you to use the equity from existing property to secure your mortgage. To get more information on what you can do with your buy to let mortgage it is a good idea to speak with a specialist broker who will be able to assess your circumstances and find you the best way to get your buy to let mortgage. 

Whats the maximum amount you can borrow on a buy to let?

In general the maximum you will be able to borrow is 4 x your salary. Some lenders will not take your personal income into account and will use the amount of rent to work out how much you will be able to borrow. To get an exact amount it is a good idea to speak to one of our specialist buy to let brokers who will be able to take your exact circumstances into account and give you exact information.

Buy to let mortgages for first time buyers

Most high street lenders do not like lending to customers that don’t already own there own home, there are however lenders out there who consider buy to let mortgages for first time buyers provided there is a good level of income to take into account.

Buy to let mortgage fees

Fees and rates tend to vary quite a bit from lender to lender. Generally they are slightly higher than that of a residential mortgage. It is a good idea to speak with a specialist that will compare the whole of the market and work out the best deal for you. Some will come with a fee of £299 with a slightly lower rate. Some will come with no product fee but a slightly higher rate. Your broker will be able to work out which one will be the most cost effective in the long run to help you make the best return on your investment.

Buy to let mortgage rates

Mortgage rates for buy to let properties will work the same way as a residential mortgage. There will be an initial tie in period from 1 year to the life time of the loan. Once the initial rate is over you will move onto the standard variable rate. Depending on the term and what is available on the market once your initial rate is over you can remortgage to continue getting the best discounted rates which will help to maintain your return on investment.  Again like residential mortgages there are different products available; fixed rate, tracker, capped or discount rate. Speak with one of our specialists and get tailored advice on what will be best for your needs.

Frequently Asked Questions

How much can I borrow?

Similar to traditional mortgages buy-to-let mortgages are related to income, though this time it is investment income from the property being bought. Lenders vary in their criteria but typically they require the rental income to exceed the mortgage payment by 25%

Eligibility for Buy-to-Let

The eligibility for buy-to-let mortgages vary dramatically so we have a brief outline here, don’t worry if you don’t match all the criteria our friendly professional mortgage advisors can help you with an individual analysis. Typical basic criteria:-

  • Homeowner either outright or with existing mortgage
  • Income of £25,000 plus a year either individually or jointly.
  • Good Credit rating without too high existing borrowing
  • Upper age limit 75, this is when the mortgage must end.
Stamp Duty

If you already own a property ,which is normally one of the criteria for a buy-to-let mortgage, then you will have to pay extra stamp duty on properties you buy valued at over £40,000. These are the rates:-

  • 0% properties upto£40,000
  • 3% upto£125k
  • 5% £125K to £250k
  • 8% ££250K-£925k
  • 13% £925k-£1.5mil
  • 15% £1.5mil-+
What are the tax implications

There are two tax considerations, capital gains tax on the property at the point of sale and Income tax on the excess of rental income over allowable expenses.

Where do I get a buy-to-let mortgage

Many of the major lenders provide buy-to-let mortgages. However, there are different criteria for lenders and it can be difficult getting the best deal without inside knowledge. Our expert advisors will be happy to help you source the best mortgage package for you.

Repaying the loan

On the whole buy-to-let mortgages are interest only. This keeps down the cost of owning a buy to let but leaves you with the problem of how to pay the loan off. One obvious solution is to sell the property before the end of the term of the mortgage. This is ok if property value continues to rise, however, there is always the chance the market will fall and the value of the property be less than the value of the property. Many people plan to use the 25% lump sum from their pension or save in a tax-efficient vehicle like an ISA.

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