BUY-TO-LET MORTGAGES
BUY-TO-LET MORTGAGES
Why Buy to Let?
Purchasing a property to rent out, can be a great but daunting decision.
There are many reasons why people look to buy property to rent out. A few we come across a lot are:
- Rental income from the property
- Pension income when you retire
- Inheritance to your children
- Capital Growth in the Future
Purchasing an investment property can be a great decision. Allowing you to make a secondary income, providing a pension income when you retire or even as inheritance to your children. However, getting the right buy-to-let mortgage is imperative.
We work alongside our landlord clients, to secure you the right lending and best possible rates. We have worked with numerous clients over the past 15 years, where they grown from one unit to sizeable portfolios.
Our success in this sector comes from understanding and structuring your finance correctly. Our brokers will sit with you to understand your current and future plans in property and advise you on making the right decisions now.
We also help with small portfolio re-structuring, advice on yields and onshore and offshore portfolios.
To discuss your mortgage requirements in the strictest confidence please get in touch using the below form.
At London-FS we fully understand Buy-To-Let purchasing and refinancing in both your personal name and in a Ltd Company or Special Purpose Vehicle (SPV).
From April 2017 the tax relief available to landlords holding properties in their personal names has been restricted on a tapering scale, consequently no longer allowing landlords to deduct costs like mortgage interest from their rental income.
This is not the same for Ltd Company or SPV purchases, whereby you can still deduct these types of expenses from the rental income generated. Hence the reason many landlords are acquiring properties in this way.
If it is the right way for you to purchase or grow your portfolio is not simply based on the rates that we will secure for you. You would need to have an I depth conversation with an accountant, to see the implication on your personal taxes. We are happy to work with your accountants or personal representatives if required.
To discuss your requirements in the strictest confidence please get in touch using the below form.
This is a specialist type of lending, where we have provided our clients with unrivalled advice and presented solutions allowing our clients to purchase and refinance properties.
Custom rental calculations and stress tests are not as stringently adhered to for large Buy-To-Let lending. Like Large mortgages for residential purposes, we find lenders have a more “overall” approach here and will look at your personal income and liabilities alongside portfolio risk. The key point to highlight is how the debt can be serviced during void periods.
To discuss your mortgage requirements in the strictest confidence please get in touch using the below form.
Eligibility Criteria For Buy to Let Mortgages
Unlike residential mortgage applications, which are mainly based on earned income and debts, buy to let mortgages have a separate eligibility criteria.
Some of it is the same or similar to residential mortgages, but there are other factors buy to let mortgage lenders will take into consideration. Affordability still is an important factor when looking at buy to let mortgages, same as with a residential mortgage.
Regardless of whether you have a residential mortgage or buy to let mortgage, you are still responsible for paying the mortgage and as such need to ensure you have funds to cover any additional expenses/ costs associated with the buy to let, especially during void periods where the rental income may cease for a period of time.
- You must be Aged 21 or older
- Own your own residential property, or another buy to let property – there are a few lenders who will consider a buy to let mortgage for a first time buyer as long as they meet the lenders criteria for this. Most lenders will want you to either be an owner occupier, with or without a residential mortgage, or another investment property, again with or without a buy to let mortgage.
- Current mortgage/ mortgages you have – to include both residential mortgages and buy to let mortgages
- Have a good credit rating and credit score. Some lenders will consider historical adverse credit for a buy to let mortgage application although you will be restricted on lenders available and this will also reflect in the interest rates you will have access to
- Minimum Income – some lenders will make a minimum personal income requirement in order to accept an application for a buy to let mortgage
- You or family members cannot live in the property after completion
- Buy to Let Mortgages are available on an interest only basis as well as a repayment mortgage
- Typical Deposit requirement is 25% of the purchase price with some lenders going up to 80% maximum loan amount
Interest Rates
- Which category of client you fall into – number of buy to let properties you own
- Number of buy to let mortgages you already have
- Loan to value
- Whether you have a good credit history/ credit score
- Whether you are a home owner
- Do you want an interest only mortgage or repayment mortgage
- Tracker Mortgage product linked to the Bank of England’s Base Rate , fixed rate mortgage or products on Variable rates
- Your budgeted monthly mortgage payment
- The rental income and whether you need a mortgage product based on a pay rate calculation or standard buy to let calculation – your mortgage adviser will be able to advise which is the best option and will use a mortgage calculator to look at which mortgage rates are best suited based on the rental income and the buy to let mortgage criteria
- Is the property a house of multiple occupancy or a single dwelling
- If you fall under the portfolio landlords definitions, you may have your properties in limited companies structures which will also determine the buy to let mortgage rate available
First Time Landlords
- What is your goal when buying a buy to let property
- What is the rental property market like in the areas you are considering
- What will the implications be for you if the house prices fall
- What will the stamp duty be
- What mortgage terms and mortgage rates are available
- What rental income will you achieve
- What will the monthly payments on your mortgage be
- Should you be looking at repayment mortgages or interest only mortgages for your buy to let mortgage
- What is the difference in the monthly payments on your mortgage between mortgage interest payments and mortgage repayments on a capital and interest basis
- What mortgage term will be best suited to you
- Do you plan to make extra payments to your mortgage to reduce the balance of your outstanding buy to let mortgage
- Do you have sufficient capital to put in a larger deposit in order to reduce the mortgage rate to get you a better deal on your btl mortgage.
- If the property is not tenanted for a period of time, how will you make the monthly payment on your btl mortgage – do you have surplus funds to cover void periods.
Why might a buy to let mortgage application be declined?
- Your projected rental income isn’t enough – this is a big one. Your lender will want to see that you can make a specific amount more in rental income property than the monthly mortgage payment
- You do not meet the minimum personal income requirement with the lender
- The property is not suitable security as a buy to let for lending purposes
- You do not meet the credit score card for the lender for a buy to let mortgage
Why use a mortgage adviser?
A mortgage broker can prove to be invaluable through the process, looking at your personal circumstances and why you want to buy property, looking at the costs associated, all the way through to sourcing the best mortgage deal for you and submitting your mortgage application.
We work alongside our buy to let clients, to secure the right mortgage deals. We have worked with numerous clients over the past 15 years, where they grown from one unit to sizeable portfolios.
Our success in this sector comes from understanding and structuring finance correctly.
Our brokers will discuss and get an understanding your current and future plans in property and advise you accordingly.
We have access to all the major mortgage lenders as well as niche, specialist lenders – allowing us to compare mortgage deals across the market and ensuring our advice meets our clients needs and requirements.
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