Buy to let mortgages
Whether you're new to property investing or have a portfolio of properties, there is plenty to consider when looking for a buy to let mortgage.
Get startedBuy to let mortgages are for people who want to invest in houses and flats. Investing in property can be risky, so you should carefully consider the risks involved.
Who can get a buy to let mortgage?
Typically, buy to let lenders will need you to already own your own home, whether outright or with an outstanding mortgage, in conjunction with a good credit record and not be stretched by existing commitments. This would normally include your existing mortgage(s) and credit commitments you may have.
There are a growing number of lenders that will look at lending if either you have historic adverse information registered against you, or do not own your own property.
The majority of lenders will require you to have a minimum income of typically £25,000 a year, but this is not the case with every lender, some are happy to consider lending where you have little or no income.
How do buy to let mortgages work?
Buy to let mortgages are in many ways just like ordinary mortgages, but with some key differences:
- The minimum deposit for a buy to let mortgage is usually 25% of the property's value although some lenders offer deals with a 15% deposit
- Interest rates on buy to let mortgages could be higher than a residential mortgage
- Lender arrangement fees could be higher.
Most landlords tend to take buy to let mortgages on an interest only basis, which means you don't pay anything off the amount borrowed. Consequently, at the end of the mortgage term you repay the capital in full. You can however take them on a repayment basis too.
Which lenders offer buy to let mortgages?
Most of the big banks and building societies offer buy to let mortgages. There are also lenders who specialise in this area. It's a good idea to talk to one of our mortgage advisors before you take out a buy to let mortgage, as we will help you choose the most suitable deal.
How much can I borrow on a buy to let basis?
The maximum you can borrow is linked to the amount of rental income you are likely to receive.
There are many different calculations used by lenders, and if the rental income is not sufficient then some lenders will consider top slicing, which involves using your income to increase the amount of available mortgage. You should talk to one of our mortgage advisors who will be able to look at which calculators will work for you.
To find out what your estimated rent might be, talk to local letting agents or check the local press to find out rent charged for similar properties.
Don't forget to budget for all of the costs associated with taking out a mortgage.
Buy to let and tax
If you sell your buy to let property for profit, you will pay Capital Gains Tax if your gain exceeds the annual Capital Gains Tax threshold. Also, rental income can be liable to Income Tax.
FAQs
How much deposit will I need?
Whilst you might only need 5% for a residential mortgage, you are going to need a higher amount on a buy to let mortgage. A large number of lenders will need a minimum deposit of 25%, although there are some that will only ask for 20%.
Can I get a buy to let mortgage when I don't own my own property?
This is not something that many lenders will lend on, however there are lenders who are happy to look at this.
What happens if my property is not let?
Don't assume that your property will always have tenants.
There will almost certainly be times when the property is unoccupied or rent isn't paid, and you'll need to have a financial 'cushion' to draw on to meet your mortgage payments. When you do have rent coming in it is wise to save some of this for eventualities such as repair bills - for example the boiler might break down or there may be a blocked drain.
Can I get a buy to let mortgage and rent the property to a family member?
The is called a 'Regulated Buy to Let' and most lenders will not consider this. Thankfully there are a handful of lenders who will.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Not all buy to let mortgages are regulated by the Financial Conduct Authority.
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There may be a fee for arranging your mortgage and the precise amount will depend on your circumstances. Our initial consultations are free, always.
Your home may be repossessed if you do not keep up repayments on your mortgage.