Buy To Let Mortgages
Whether you are an existing landlord, first time landlord or looking to purchase a Buy to Let investment property through a limited company we can help you. With the underwriting and criteria for Buy to Let mortgages having changed so much in recent years, where factors such as your tax band, personal income, initial rate period, rental income and varying rental stress tests can all influence the amount of mortgage available to you, obtaining expert whole of market advice can be critical in ensuring that the product and lender selected not only meet your loan requirements but also take into account all of the above factors.
BUY TO LET
The One That’s Right for You
Depending on your Buy To Let investment Goals, One of the Following Will Be Right For You
Buy To Let (Personal Name)
Where one or more individuals purchase a Buy To Let property in their own names.
Rental Income is Used to Determine Maximum Loan
Most Buy To Let Properties are held in this way
Mortgage Interest Is Not a Fully Deductible Expense for Most Individuals
All Buy To Let Lenders Consider This Type of Purchase
Due to So Many Lenders Offering these Mortgages the interest rates & fees can be more comptetitive
Personal Income Can be Used to Borrow More In Case The Rental Is Not Sufficient (Top Slicing)
Let To Buy (Personal Name)
Where one or more individuals are converting their existing residential property to a Buy to Let.
Rental Income is Used to Determine Maximum Loan
Often Used When Homeowners Want to Retain their Existing Home, Let it Out and Still Purchase a New Home
Can Help in Raising funds for an Onward Deposit for a New Home
Rental Income is Declared Via The Borrowers Personal Self Assessment
Interest Rates & Fees are Usually Compettitve
Useful for Existing Homeowners Looking To Invest In Property Whilst Wanting to Upsize or Purchase a Different Home to Live In
Limited Company Buy To Let
Where individual(s) setup a Limited Company through which they purchase a Buy to Let Property.
Rental Income is Used to Determine Maximum Loan
Widely Regarded as the Tax Efficient Solution to Buying Buy To Let Property
Corporation Tax is Paid On Profits Which For Most People Is At A Lower Rate Than Income Tax
Expenditure and Interest on The Mortgage Payments Are A Fully Deductible Expense
Only a Subset of Buy To Let Lenders Offer Such Mortgages
Interest Rates and Fees May Not Be Compettive Compared to Personal Name Buy To Let Mortgages
Buy To Let Frequently Asked Questions
We have compiled a list of Top 10 questions that we get asked which we hope will offer a useful insight for existing landlords and new Buy to Let investors alike.
1. How much can I borrow?
The majority of Buy to Let mortgage products limit the borrowing at 75% of the property value (requiring a 25% deposit). However, there are a small number of lenders that will allow you to borrow up to 85% of the property value.
2. Is there anything else that might affect how much I can borrow on my buy to let property?
The expected rental as well as the rental stress that the lender will apply will also limit the borrowing capacity. If you are finding it difficult to estimate what the expected rental for a property that you are interested in purchasing will be you can talk to us and we can provide you with information on some useful tools that will assist you in getting an idea of the rental that you can expect.
Some lenders on our panel will also allow you to use your personal income in circumstances where the rental on its own not sufficient to get the mortgage amount that you require, this can be invaluable in situations where you have a limited deposit/personal funds to complete the purchase and the mortgage that the lender is able to offer is not sufficient.
Some lenders on our panel will also allow you to use your personal income in circumstances where the rental on its own not sufficient to get the mortgage amount that you require, this can be invaluable in situations where you have a limited deposit/personal funds to complete the purchase and the mortgage that the lender is able to offer is not sufficient.
3. What is a Stress Test?
Lenders use a stress test to determine how much mortgage a borrower can comfortably afford. This will usually involve a lender working out the monthly payment based on an interest rate that they choose. This will then be multiplied by a percentage (coverage) value in excess of 100% and the result is what the minimum monthly rent should be to fund the mortgage amount that you require.
For example:
You would like to borrow £300,000
The lender that you apply to uses an interest rate of 5% with a coverage value of 125%.
5% of £300,000 = £15,000
To arrive at the monthly payment the lender will divide £15,000 by 12 = £1,250
Then it would be multiplied by the coverage percentage of 125%:
i.e. 125% of £1,250 = £1562.50
Therefore, the minimum rent that you require to get a loan of £300,000 is £1,562.50. As mentioned above, if this rent is not achievable, we could look to recommend a lender that will allow you to use your personal income to top-up the rental income.
For example:
You would like to borrow £300,000
The lender that you apply to uses an interest rate of 5% with a coverage value of 125%.
5% of £300,000 = £15,000
To arrive at the monthly payment the lender will divide £15,000 by 12 = £1,250
Then it would be multiplied by the coverage percentage of 125%:
i.e. 125% of £1,250 = £1562.50
Therefore, the minimum rent that you require to get a loan of £300,000 is £1,562.50. As mentioned above, if this rent is not achievable, we could look to recommend a lender that will allow you to use your personal income to top-up the rental income.
4. Is the stress test the same for all lenders?
No. Different lenders may choose to use a different interest rate to stress test. At the time of writing, the lowest stress test from our panel of lenders and based on a remortgage where the value of the property is £400,000 & Loan Required is £300,000 was 2.54% which would require the minimum monthly rental income to be £793.75.
5. I do not own the property that I live in, but I would like to purchase a Buy to Let investment property to let out with a view to generate income, is this allowed?
Yes, we do have lenders on our panel that (subject to certain conditions) allow First Time Buyers to obtain a Buy to Let mortgage.
6. Do I have to earn a minimum amount of income to be eligible for a Buy to Let mortgage?
No, you don’t, we have lenders on our panel that do not have a minimum income criterion.
7. Will my income tax band affect how much I can borrow on a Buy to Let mortgage?
Some lenders will adjust the Interest rate & coverage percentage based on your tax band. Whilst this could have implications on the maximum that you can borrow, it varies from lender to lender so it is best to have a conversation with us to check which lender will be willing to consider the loan amount that you require.
8. Up to what age can I get a Buy let mortgage?
Age limits vary from lender to lender however, we have lenders on our panel that do not place a limit on the borrowers age for a Buy to Let mortgage.
9. My credit history is not good; can I still get a Buy to Let mortgage?
This largely depends on what has caused your credit history to be impacted, however, we do have lenders on our panel that consider individuals who have had issues keeping up with credit commitments in the past.
10. Can you help me get a Limited Company Buy To Let Mortgage??
Yes we can.
