Buy-To-Let Mortgages &
Best Fixed Rates
Buy-to-let mortgages can be highly complex. We fully understand the complexities of these commercial mortgage instruments. Many Landlords are questioning whether buy-to-lets are still worth it, and we can help you weigh up your options so that you make a sound investment choice!
Lenders have different terms and conditions based on rental income, credit history, property type, tenancy type, individual income, other rental properties, etc. We can guide you quickly and seamlessly through the maze of buy-to-let protocol and ensure you get the best rates. Whether you wish to buy using special purpose vehicles (SPVs), which is ultimately a limited company mortgage or if you purchase using your personal name, we can help. We can also offer Holiday Let mortgages.
It is important to note that Buy-to-Let is a different mortgage type to Let-to-buy which you can read about here
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Buy-To-Let
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- We will never charge a broker fee
- Whole of market advice
- Access to exclusive rates often not available on the high street
- Immediate appointments available
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- At times which will suit you
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What Is a Buy-To-Let Mortgage?
A buy-to-let mortgage is a specific type of loan that allows you to purchase a property for rental and investment purposes. This type of loan typically requires a larger deposit and has higher interest rates than a standard residential mortgage, as it is deemed to be a higher risk. It also differs from traditional mortgages in that it is semi-commercial, and therefore, consideration is required for taxes, fees and insurance costs. Be aware of the additional Stamp Duty costs for many. Our calculator can work this out for you here
How Does a Buy-to-Let Mortgage Work?
With a buy-to-let mortgage, you borrow money from a lender to purchase and rent out the property to make an income from the rent tenants pay. The majority of Landlord’s aim to benefit from long-term capital growth coupled with revenue generated by rent payments.
What Criteria Are Needed for Me To Get a Buy-to-Let Mortgage?
Buy-to-let mortgages in the UK typically require a minimum deposit of 25% of the property’s purchase price, so borrowers should be aware that they will need to have at least this amount available before proceeding.
You cannot live in a BTL property as the mortgage is granted for renting to a tenant.
Lenders want to ensure that the rent the property can generate covers a minimum amount. If buying in personal names, lenders generally want the rent to cover 125% or 145% as a higher rate taxpayer at a specific rate to protect themselves upon future rate inflation.
Lenders would want a clean credit history and a minimum credit score, albeit this can differ from one lender to another.
Most lenders wish to see a minimum income, albeit historically, a few lenders have taken the property consideration solely rather than an applicant’s income.
An interest-only mortgage is typical for these types of properties, but you need to consider how you will repay the capital element of the mortgage. Perhaps a repayment mortgage could be a reasonable consideration for some people, depending upon circumstances.
How Much Buy-to-Let Mortgage Can I Borrow?
The amount of buy-to-let mortgage you can borrow depends on your circumstances, such as the amount of deposit you have available, typically a minimum of 25% deposit. Once the lender is satisfied you have the deposit, it is based on a rental income assessment at a set formula (see ‘What Criteria’ section), which will tell you the maximum advance. Some lenders allow something called ‘Top slicing’, a lenders formula, in addition to rental achieved, which takes excess income into account, such as salary – this can benefit the higher earners amongst you.How Many Buy-to-Let Mortgages Can I Have?
You can have as many as you wish, assuming lenders are willing to lend, which is based on risk. Lenders will have strict criteria where they consider that you may be ‘over-exposed’ in the private rental sector by having multiple BTL properties and therefore cap lending or not lend to you at all.
Some lenders only allow you to have a few BTL mortgages with them and ignore other lending.
You become a “portfolio” landlord when you have four or more BTL mortgage properties, which could result in stringent checks and criteria.
If buying multiple properties in one block of flats can also cause a lending challenge.
Where Are the Best Locations To Buy?
What a question! This depends on what you are looking for. For example, if you are looking for capital growth, then major cities have performed better than rural areas. Somewhere with decent infrastructure is ideal; good transport links are a must! Buy in an area where you have a strong pool of tenants.
Please ensure you understand how to calculate what a property is likely to yield and the cost implications. If it is 3% and your mortgage rate is 5%, then you will be making a loss. What are the costs of the service charges, ground rent & insurance?
Can I get a Buy-to-Let into Retirement?
Yes, many lenders will lend into retirement, but all lenders will have a maximum age of lending – i.e. until you are 75 (some lenders will be higher). Therefore, under this example, if you are 65, when you take the mortgage, they will grant a ten-year mortgage, so it ends at age 75.
What Are My Options When I Need To Repay the Loan?
This can be a challenge if you cannot re-mortgage with another lender due to age or credit issues. Realistically, it is essential that you pre-plan for this scenario. One solution is to sell the property but be prepared to pay CGT (Capital Gains Tax) if you have made a profit. Oh yes, you will also lose the generated income too.
Can I Buy and Get a BTL Mortgage as a Limited Company?
Yes, these are SPVs (Special Purpose Vehicles) when a mortgage is granted to a limited company with Directors and Shareholders as with other Limited companies. There are tax benefits as you can offset interest mortgage costs and pay dividends to shareholders (which can include your kids) and, therefore, deemed tax-efficient. The downside is that the cost of borrowing and fees can be slightly higher than standard BTL mortgages. Rather than pay income tax, the Limited company pays Corporation Tax.
What Tax Implications Do I Need To Consider?
There are three tax considerations you need to be aware of;
- SDLT (Stamp Duty Land Tax): This is payable upon purchase of the property, and presently, if buying a second property, there is an additional 3% payable, Have a look at our calculator conranfinancial.co.uk/how-much-is-stamp-duty/
- Income Tax or Corporation Tax: If you buy personally, you need to include the income on your tax return and pay your nominal tax rate. If you purchase as an SPV (limited company), you are liable for Corporation Tax.
- Capital Gains Tax (CGT): If you are fortunate enough that the property increases in value, you will have to pay CGT at your nominal rate – it is cheaper than income tax presently.
Which Lenders Are the Best and How Many Lenders Are There?
BTL lending works similarly to that of the residential mortgage space. It changes all the time! Buy-to-Let lenders are not high street based, albeit a few do BTLs, as it is a semi-commercial product and needs an expert to advise and guide you (unless you are a seasoned professional). Thousands of products are available from dozens of lenders, so an Independent Mortgage Broker is the best place to start. We would love to help; you’re welcome.
I Am Residing in My Home but Want to Rent It Out. Can I Do This?
We wish it could be this easy but alas not! When renting your residence, speak to an Independent Broker for advice. We know which lenders will give consent, which could be more beneficial if you are lucky enough to have an existing residential mortgage with this lender!
If not, you will need a BTL mortgage which could result in having to move lenders, which, if you are on a preferred rate with a redemption penalty, it could cost you dearly.
If you are thinking long-term, an initial conversation with an Independent Mortgage Expert is a wise investment of your time.
Should I Do an Interest Only or Repayment BTL?
If you are looking to maximise immediate short-term income, then interest only will be cheaper, meaning that you will have more income.
However, suppose income is not essential, and your investment goal is for the long term. In that case, a repayment mortgage will ensure your BTL mortgage is fully repaid at a future time. You will have full ownership of the property resulting in all the income going to you rather than on a mortgage payment to a lender. An excellent pension for some!
How Can Our Expert Buy-to Let Mortgage Advisers Help?
At Conran Mortgages, our expert buy-to-let mortgage advisers have extensive experience in the industry and understand the complexities involved. We take a holistic approach to advice and guide our clients through the process step by step. Our team can provide you with tailored recommendations based on your requirements so that you can make an informed decision when choosing the right mortgage for your buy-to-let property.
As Independent Experts who do not charge a Broker Fee, we have access to the whole of market and know our stuff! For all other types of mortgages, please take a look at our home page here