Buy to Let Mortgages with a Pre-approval in 30mins

What is a Buy to Let mortgage and how does it differ from a regular mortgage?

A Buy to Let mortgage allows you to buy and rent out property, to make some income or get it to pay for itself. As it’s for an investment property you will rent it out to a tenant.

Buy to Let mortgages are specialist products that allow you to buy and rent a house or apartment out.

What are the eligibility criteria for obtaining a Buy to Let mortgage?

It varies from lender to lender. Some lenders will have minimum income criteria, while others won’t. 

The biggest hurdle for most people is the deposit which is 25% on the value of the property.

The amount that you will be able to borrow is based on the rental income the property can generate. Beyond that, the same documents are required – proof of ID, bank statement and evidence of income – the same as with a residential mortgage.

How much deposit is usually required for a Buy to Let mortgage?

The biggest hurdle for most people is the deposit which is 25% on the value of the property. 

Should I choose interest only or repayment on a Buy to Let mortgage?

It depends on your individual circumstances, your goals for the property and your attitude to risk. Some people want interest-only, so that they can maximise their monthly income from the property. 

Let’s say they’re paying £500 for a mortgage on interest only, and they’re renting it for £800 a month. They make £300 every month to supplement their income. They are taking a bit of a risk there because if the property isn’t paid off by the time the term ends, how will they repay the lender? You need an exit strategy to pay off the outstanding mortgage – because the mortgage doesn’t decrease every month. 

Other people will take out a repayment mortgage for the property and every month they’re repaying a bit. They want the mortgage to self-sustain and pay for itself in the end. Perhaps in retirement they then have this nest egg of a property that they can either sell or rent to supplement their pension income. 

It’s very dependent on your life stage, your risk profile and financial goals. You would sit down and discuss it with your mortgage advisor. You will go through all the pros and cons of each option and then make an informed decision on what’s best for you.

Are there any specific fees associated with Buy to Let mortgages that borrowers should be aware of?

On any purchase you will have solicitor fees and you may have broker fees. You’d also have stamp duty which you discuss with your solicitor – they confirm how much stamp duty you’re eligible for. Because you are purchasing a second property there is a 3% surcharge on stamp duty owed to HMRC. 

With mortgage products you can get some that have no fees, while others will have a product fee. It varies very much depending on the product. Your mortgage advisor would go through all of this and look at our sourcing solution. 

What factors do lenders typically consider when assessing a Buy to Let mortgage application?

They’ll look at your income and your credit score and they’ll also look at the rental income. They’ll have calculations in the background to work out how much rent is needed to cover the mortgage and other costs. The lender then decides how much to lend based on that rental cover. 

The deposit is another part we normally look at because that affects how much you can borrow, as well.

Can you provide some advice on finding the right Buy to Let mortgage deals?

The simple answer is to speak to your mortgage advisor.

What are the implications of recent tax changes on Buy to Let mortgages.

With anything to do with tax, we always refer clients to their accountants – they are experts in taxation. It goes a bit beyond our remit. We can guide clients to accountants if needed. We always recommend seeking professional advice on anything to do with tax.

How do I remortgage a Buy to Let property? When might it be advantageous?

It’s similar to remortgaging your residential mortgage. You would typically do it when your fixed product is coming to an end, to avoid going onto a variable rate. 

Landlords often want to remortgage to move to a cheaper rate, because it means they pay less. It’s a business investment so they want to get the best deal. Most people remortgage when their rate runs out – but sometimes it’s because the house has increased in value. 

Landlords can remortgage to take equity out. By taking some of the capital growth out of the property they can either invest it in other properties.

Are there any restrictions on using a Buy to Let mortgage for properties in certain areas or for specific tenant types?

A lot of mortgages will be designed around ASTs – that’s Assured Shorthold Tenancies. That is the typical tenancy that a family or an individual would take in a property, usually for a six month minimum term. 

Other specialist lenders will only deal with HMOs – Houses in Multiple Occupation. So if you have a mortgage on a property for an AST, you could not then go and rent out individual rooms in the property as an HMO. That would be in breach of your agreement with the lender. 

What are the potential risks in investing in Buy to Let properties?

As with any investment you are at risk of losing a property or your initial investment. There’s a risk of tenants not paying their rent – you would still have to pay the mortgage. 

There’s also the risk that someone damages the property, or that interest rates increase. The big one to be aware of is that this is an investment – you could potentially lose the money you’re investing.

Can you discuss the importance of property management and its impact on Buy to Let mortgages?

When you have a Buy to Let property, you have two options: managing it yourself or appointing an agent. 

If you manage it yourself and a tenant rings about a leaking pipe, you have to sort it yourself. It might mean calling an emergency plumber or dealing with it personally. It’s the same if they’re locked out and they can’t get into their property etc – you have responsibilities and duties to the tenant. 

Or, you can get everything managed by a lettings agent. They would deal with all of that for you, in exchange for a fee, which is usually a percentage of the monthly rent. They take care of maintenance, collect the money, do invoices and inventory checks. They deal with any of the tenants’ issues for you. 

What are the consequences of defaulting on a Buy to Let mortgage?

If you default, the lender will sell the property on your behalf to repay the mortgage. The lender will give you whatever money remains, if any. Defaulting destroys your credit score, as does a home repossession. 

Can you explain the process of adding additional properties to an existing Buy to Let portfolio?

This is where you have one Buy to Let and then you buy another, and another and another, until you create a portfolio of multiple Buy to Lets. It is the same process as for your first Buy to Let when you add another one. You can do it with the same lender or a different one. You still need a 25% deposit. 

A lot of lenders will have a limit on how many properties you can have with them. With some that limit is 10 before you become too large and they want you to move the portfolio to another lender. 

Some lenders will only want a certain number of properties, but don’t mind if you have mortgages with other lenders. One specific lender which will allow you to group all of your mortgages under one umbrella mortgage. You get a single rate, one payment and one end date for all your properties. It means you don’t have to remortgage each property individually at the end of the term. You would just have one large umbrella mortgage to deal with your portfolio.

What steps should a first time Buy to Let investor take before applying for a mortgage?

Always speak to a mortgage adviser. We’ll lay out the steps to take, the pros and cons and the pitfalls. What would your liabilities be? What’s the right strategy for you? How much could you borrow? How much do you need and where will you get your deposit?

Always speak to a professional before you embark on this – it’s not as easy as people think. There is more work being a landlord than you might realise, so get advice before you start.

In addition to buy-to-let mortgages, we also offer self-build mortgages, first time buyer mortgages, buy-to-let limited company mortgages, and more!