SMALL PORTFOLIO | LTD COMPANY | LARGE BTL

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

Depending on your current situation and what you want to achieve you will fall into one of three categories and how you will be treated when applying for a buy to let mortgage will differ depending on which category you fall into (See below). This is why we believe getting professional mortgage advice when looking at buy-to-let mortgages is imperative.

First time landlord/ Small Portfolio Landlord

This is someone who has 4 or less properties

Portfolio Landlord

If you have 4 or more rental properties, you are classified as a portfolio landlord

Professional Landlord

If majority or all of your income is derived from property and you have in excess of 10 investment properties, you would be classified as a professional landlord

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

The Mortgage interest rates for buy to let mortgages will depend on a number of factors, your mortgage adviser will look at and discuss these in detail when comparing mortgages for you:

• 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

For first time landlords looking at starting their journey there are a number of things to think about for both the property and buy to let (btl) mortgages. We have a put together a list of questions below to help guide you:

• 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.

As you can see from the above, there is a lot to think about around buy to let mortgages and good advice from an experienced mortgage adviser will help give you the reassurance and understanding you need, and make the whole process run a smoothly as possible.

There are several reasons why your application for a buy to let mortgage application could be rejected. Here are some of the more common ones:

• 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

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.

Dhavi Limited (t/a London FS), is directly authorised and regulated by the Financial Conduct Authority (FCA). Firm reference number 628993. Dhavi Limited is registered in England No. 7301914

Registered Office: 7 Bell Yard, London, WC2A 2JR. Tel: 020 8427 5057. Fax: 020 7160 5331

* Some forms of buy to let, secured loans, commercial finance, bridging finance, overseas or offshore mortgages and will writing are not regulated by the Financial Conduct Authority (FCA), or Prudential Regulation Authority.

Your initial mortgage consultation is obligation free. We charge an administration fee for processing each mortgage contract and our fees only apply when you decide to proceed with an application.

For standard residential mortgage contracts the typical fee of up to 1% of the mortgage amount applies of which £500 is payable on application with the balance payable on offer .

For buy-to-let mortgages a typical fee of up to 1% of the mortgage amount applies of which £500 is payable on application with the balance payable on offer.

For offshore and commercial mortgages a typical fee of 1% of the mortgage amount applies of which £1000 is payable on application with the balance payable on offer.

For impaired credit lending the typical fee is 1% of the mortgage loan applies of which £500 is payable on application with the balance payable on offer.

The overall cost for comparison is 5.5% APR. The actual rate will depend on your circumstances. Ask for a personalised illustration. The advice and/or guidance contained within this website is subject to UK regulatory regime and therefore is restricted to consumers based in the UK.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.