Buy To Let

Your Guide to Buy to Let Mortgages

If you’re seeking to purchase a property with the intention of renting it out to tenants, you’ll require a buy-to-let mortgage

What’s a Buy to Let Mortgage?

Put plainly, a buy-to-let mortgage is a type of loan provided by a bank or lender to individuals who aim to let out a property to tenants. Unlike a standard mortgage, it’s designed explicitly for those intending to rent out a property. In the UK, securing finance for an investment property typically requires a buy-to-let mortgage or similar lending tailored for this purpose.

Differences Between A Buy To Let And A Standard Mortgage?

There are several key considerations to bear in mind, so it’s crucial to conduct thorough research before committing to any agreement.

A buy-to-let mortgage is obligatory for a property intended for rental purposes and typically necessitates a larger deposit to satisfy the lender’s security requirements. Moreover, there’s often a higher interest rate or increased fees imposed by the lender, and stamp duty is applicable to all properties within your investment portfolio. Consequently, the mortgage expenses are frequently higher compared to a conventional residential mortgage.

Why Are The Rates Higher?

The rationale behind this lies in the unpredictability inherent in being a landlord. While you anticipate that the monthly payments will suffice to cover the debt, there’s always the possibility of complications arising with tenants. Hence, your lender seeks additional safeguards to mitigate potential difficulties. It ultimately boils down to managing the inherent risks involved.

How Can You Pay Off The Debt?

Assuming you choose a capital repayment mortgage, you’ll make monthly repayments to repay both the amount borrowed and the interest. If you’re on an interest-only mortgage, you’ll only be paying the far smaller amount of interest on a monthly basis, with the full amount of the loan due at the end of the mortgage term. This can be repaid by selling the property.

How much deposit do I need for a Buy to Let?

Generally, the required deposit is 25%, some lenders will allow for 20% however by obtaining 25% will give you a much larger choice of lender.

Types of Buy To Let Mortgages

There are two main types of buy to let (BTL) mortgage, Fixed rate or Variable, the most common choice is a fixed rate mortgage, this allows the borrower to understand how much they need to pay back to the bank each month without seeing any fluctuations fortypically 2 or 5 years. Howeversome will take a potentially more risky approach and opt for a variable mortgage. Typically the variable buy to let mortgage would be a Tracker Mortgage, the tracker mortgage will follow the Bank of England base rate, meaning if the base rate increases your payments would aslo increase, if the base rate drops, so will your payments.

Why Get A Buy To Let Mortgage?

If you’re looking to invest in a rental property, a buy to let mortgage is a must unless you buy a property outright. If you have positive equity, you will make money even if you have to sell to clear the debt. Also, a big deposit coupled with  the fact that you only pay interest means the monthly payments tend to be lower than a traditional loan making it easier if the property is empty at any time.

As long as you have a good credit rating, you should be eligible. Get in touch now to find the right mortgage deal for you.

Some types of buy to let mortgages are not regulated by the FCA.

Difference between Ltd Company Buy to Let & Personal Buy to Let.

A Ltd Company Buy to Let Mortgage means the property and mortgage sits in the name of a Ltd Company, you don’t personally own the property instead it is the asset of the company. Personal Buy to Let means the property is owned by you as an individual.

Why would you choose to own a property under a Ltd Company?

Before making the decision to setup a Ltd Company to buy investment property under, you should seek Tax advice from a qualified professional. It is commonly known that if you sit in a 40% personal tax bracket it maybe more tax efficient to put a Buy to Let property under a Ltd Company, however you should seek professional advice before making this decision.