What you need to know about Buy to Let mortgages
Are you looking to buy your first buy-to-let property or increase your current property portfolio? I can help. I have access to many high street and specialist lender’s, which will enable me to find the best buy-to-let mortgage for your needs. I understand the lenders criteria, loan amounts, and application processes, thereby saving you time and money.
01What is a buy-to-let mortgage?
- A buy-to-let mortgage is a mortgage from a bank or building society that enables you to purchase a property with the specific aim of letting it out to tenants. Most buy-to-let mortgages are interest only, with the landlord paying the monthly payments using rental income.
02How much deposit do I need for a buy-to-let mortgage?
- To get the most competitive rates and have the widest choice of lenders, a minimum deposit contribution of 25% is required.
- There are some lenders however, who will consider applications based on just 20% deposit contribution and a very small number who would potentially be willing to look at applications where 15% deposit contribution required.
- Typically, this varies from lender to lender. You may need to provide a deposit of between 20-30% of the property’s value. However, to get the most competitive rates and wider choice of lenders, a minimum deposit of 25% is required.
- As with any type of mortgage lending, the lower the deposit and higher loan to value (LTV) the greater the risk becomes to the lender thereby making the interest rates higher.
03How is a buy-to-let mortgage different from a residential mortgage?
- Buy-to-let mortgages usually have higher interest rates, require larger deposits, and are based on the potential rental income as well as your personal financial situation. Buy-to-let mortgages are investment loans, and you cannot reside in the property as a buy-to-let owner. A buy to let mortgage will not be regulated by the Financial Conduct Authority (FCA).
04What are the current interest rates for buy-to-let mortgages?
Interest rates vary by lender and product. It’s best to compare rates from different lenders. It’s advisable to speak to a mortgage adviser to get the best deal available, as we work with a wide range of lenders.
05How much can I borrow with a buy-to-let mortgage?
- This depends on the potential rental income. Typically needing to cover 125-145% of the mortgage payments, in addition to your personal income and financial stability being taken into account.
06Do I need a specific type of property insurance for a buy-to-let property?
- Yes, you’ll need landlord insurance, which covers rental properties and includes buildings as well as liability insurance.
07Can I use a buy-to-let mortgage for any type of property?
- Most buy-to-let mortgages are for standard residential properties. Special properties like HMOs (houses in multiple occupation) or commercial properties may require specific types of mortgages.
08What are the tax implications of owning a buy-to-let property?
- Rental income is subject to income tax, and you may also pay capital gains tax when you sell the property. Mortgage interest tax relief has been reduced, so it’s important to consult with an accountant prior to purchasing a buy to let property
09Can I live in my buy-to-let property?
- No, buy-to-let mortgages are specifically for rental properties. If you plan to live in the property, you’ll need a residential mortgage.
10What happens if my buy-to-let mortgage application is declined?
- For a buy-to-let mortgage, most lenders require you to have a minimum annual income of around £25,000. However, the exact amount can vary depending on the lender and your overall financial situation. Additionally, lenders will look at the expected rental income from the property to ensure it covers the mortgage payments by a certain percentage, typically around 125-145%.