Buy to Let Mortgages

Once you’ve found a property that you would like to buy to rent out, it’s time to start the buy to let mortgage application process.

How much you can borrow on a buy to let mortgage will depend on the rental income you will receive from the property.  The rental income must exceed the mortgage payment by a minimum of 25%, with some lenders this percentage is much more.

Getting a buy to let mortgage is more difficult than residential due to the increased risk by the mortgage lender.

5 Steps on How to get a buy to let mortgage:

1. Find out how much you can borrow – Speak to an experienced buy to let mortgage broker to find out how much you can borrow and how much deposit you’ll need to put down.  A good starting point would be to do some research on similar properties in the area online to see how much they are being let out for.
2. Mortgage agreement in principle – Your mortgage broker will produce you some quotations and provide you with a mortgage agreement in principle documents to support any offers you make with estate agents.  You’ll have options such as interest-only or repayment and fixed or variable interest rates.
3. Mortgage application – Once you are ready and if you’re happy with the quotations, we’ll start the ball rolling with your buy to let mortgage application.  Documents will be required such as 3 months bank statements, rental income projections, identification, your evidence of income etc.
4. Mortgage offer – Your dedicated case manager and mortgage broker will help you overcome any hurdles that we face along the application process such as with surveys, further document requests, and any additional property reports that are requested until we receive your formal buy to let mortgage offer.
5. Mortgage completion – Once we have your mortgage offer it is then over to your conveyancer to finish off the legal work. Generally, a purchase will take between 3 and 4 months from having your offer accepted to completion.  Once you’ve completed, you are now the legal owners and you can start to get your property ready for your tenants to move in.

There is not a limit of how many buy to let mortgages you can have, some clients have hundreds, others just have a couple of properties.

Whether you buy your properties in your sole name, joint names or limited company options there’s no limit to the number of buy to let mortgages you can have providing you still meet your lenders criteria.

How many buy to let mortgages you have will depend on your attitude towards risk and also your future plans, i.e. why are you investing in buy to let.  Reasons such as:

• Pension planning or to supplement retirement income.
• To be your main income to replace your job.
• To benefit from future capital growth and property price increases.
• To build an asset to pass on to future generations etc.

Yes, buy to let mortgages tend to have higher fees and interest rates than residential mortgages.

Buy to let mortgages have higher fees as they are more complicated to administer, landlords are deemed as higher risk lending, and there is more underwriting and processing involved in the application process.

Also, with buy to let mortgages, you’ll need to put a much bigger deposit down on the property.  The deposit will need to be 20%+ of the valuation.  As with all types of mortgages, interest rates work in bands, therefore, if you have access to more deposit, putting more down could reduce your interest rate significantly.

There may also be a stamp duty surcharge involved with buying investment properties.  A good place to check the latest stamp duty rates etc is the HMRC stamp duty calculator page.

Your mortgage broker will work with you to ensure that you are not paying more interest or fees than you have to with your mortgage.

A buy to let mortgage works as a loan designed to allow first time buyer or existing landlords buy or remortgage their rental properties.

How a buy to let mortgage works is very similar to a regular residential mortgage with some key differences such as:

• Landlords usually choose to go interest-only with buy to let mortgages with a view to keep the repayments down.
• How much you can borrow is based around potential rental income on the property.
• Buy to let mortgage rates are typically higher.
• A larger deposit of 20%+ is required for new purchases.

The application process for a buy to let mortgage is very much like a regular mortgage also, documents such as your identification, bank statements and proof of earnings will be requested.

To find out more about how a buy to let mortgage works, your mortgage broker will answer all your questions and provide you quotations.

The costs of taking out a buy to let mortgage are:

• Deposit of 20%+.
• Mortgage fees.
• Survey.
• Legal fees.
• Stamp duty.
• Letting agent fees.

Compared to residential mortgages, buy to let’s have higher costs as they are more complicated to administer, investors are deemed as higher risk lending, and there is additional underwriting and processing involved in the application process.

With a buy to let mortgage, you’ll need to put a much bigger deposit down on the property.  The deposit will need to be a minimum of 20%+ of the value.

To reduce the costs of your buy to let mortgage, interest rates work in bands, therefore, if you have access to more deposit, putting more down could reduce your monthly payment significantly.

There may also be a stamp duty surcharge cost involved with buying buy to let properties.  A good place to check the latest stamp duty rates etc is the HMRC stamp duty calculator page.

Yes, you can change your mortgage to a buy to let.  It’s common for people’s personal circumstances to change, popular situations include:

• Moving in with a partner.
• Relocating.
• Moving home and keeping your current one as a buy to let.
• New job where accommodation is provided.
• Joining the forces such as the British Army, Royal Air Force, Royal Marines or Royal Navy.

To change a mortgage to a buy to let can be done in 3 ways:

1. Getting consent to let from your existing lender is a good way to start if you’re part way through a fixed rate deal.  Consent to let is a temporary measure for maybe for a year or two usually until your fixed rate ends. You’ll then have the option to sell the property if it doesn’t have at least 20% equity.
2. Remortgage to a buy to let product with your current lender, you’ll need 20%+ equity in the property and your lender will offer you one of their buy to let mortgage products, usually on an interest only basis.
3. Search the market and remortgage to a buy to let mortgage product with a new lender.  Your mortgage broker will search the market for you to recommend the best deal.

20% minimum deposit is required for a buy to let mortgage. A buy to let mortgage will usually not go above an 80% loan to value ratio.

If you have more money available, a buy to let mortgage interest rate will work in bands, for example, a 30% deposit might allow you to qualify for a better interest rate than a 20% deposit mortgage.

For existing landlords with lots of equity, it’s common to remortgage a buy to let property already owned to raise enough funds to put a deposit down for a new buy to let mortgage.

Each buy to let mortgage lender will have different criteria surrounding deposits required. Your mortgage broker will run through what options are best for you and your personal situation.

Yes, if you have a deposit and meet lending criteria you can get a buy to let mortgage.

If you’re looking to get an investment property and you haven’t got the cash available, you’ll need to get a buy to let mortgage.

Getting a buy to let mortgage is a straightforward process and both first time landlords and existing landlords can qualify.

You can get a buy to let mortgage if you have a minimum of 20% deposit to put down on the property and you meet lending criteria.

Factors such as rental income that you’re going to receive, your credit score, your income, and your affordability will determine whether you can met the lending criteria for a buy to let mortgage.

A let to buy mortgage is when you change your current property into a buy to let and get a new residential home mover mortgage for an onward purchase.

Examples of what a let to buy mortgage is used for including:

• Moving in with a partner and buying a new home together.
• Moving to a bigger property and keeping your existing one to rent out.
• Relocating and keeping your existing property to buy in a new area.

A let to buy mortgage can provide a good way to move in with your partner, if you have never lived together before, you still have your property available in the background for security.

For a let you buy mortgage, you’ll need a minimum of 20% to 25% equity available on your current property to convert it to a buy to let mortgage.  If you have more equity that this available, what many let to buy mortgage customers do is capital raise with the buy to let property to raise a deposit for the new purchase.

Things to consider with a let to buy mortgage are there may be additional stamp duty to pay on your new purchase, the HMRC stamp duty calculator will let you know the current amount payable.

How much a buy to let mortgage will cost will depend on:

• The purchase price of the property.
• The type of property you’re purchasing, i.e. student let, HMO etc.
• Your experience level as a landlord.
• How much deposit you have available, minimum 20%.
• The loan to value, up to 80% buy to let mortgage deals are available.
• Your credit score.

The buy to let mortgage market is specialist and it centred around strict lending criteria, it’s not simply a case of going online to apply for the cheapest deal.

Compare 1,000s of buy to let mortgage deals 7 days a week with an experienced mortgage broker team.

Buy to let mortgages are loans used by landlords to buy a property to rent out to tenants. The other type of mortgages available are residential mortgages, these are loans designed for clients buying a new property to live in.

Buy to let mortgages are usually on an interest only basis with a view to keep the monthly payments by the landlord to a minimum.

Buy to let mortgages also lend to a maximum of around 80% loan to value, meaning a minimum of 20%+ deposit is required as a downpayment.

Buy to let mortgages are classed as specialist lending products as they are classed as higher risk of repossession by the lender. Buy to let mortgages are harder to get accepted for than residential mortgages.

Yes, the majority of buy to let mortgages are on an interest only basis.

An interest only basis is where the loan amount stays the same throughout the term of the mortgage.  At the end of the term, the property can be sold with a view to repay the loan amount back to the lender.

Landlords choose to put buy to let mortgages on an interest only basis to keep their monthly costs to a minimum and to increase the profit they make from each property.

With interest only buy to let mortgages you’ll still have the option to fix the interest rate for typically 2, 3, or 5 years for peace of mind and budgeting purposes.

Repayment buy to let mortgages are available however, due to the cost of paying both the interest and capital back, these are often unaffordable and make buy to let less attractive.

How much you can borrow on a buy to let mortgage will be determined by the projected rental income that you’re going to receive for the property and the size of the deposit you have available to put down.

How much you can borrow on a buy to let mortgage will be influenced by:

• Size of deposit, the bigger this downpayment is the more you’ll be able to borrow.
• Rental income, the rent payment will need to cover the mortgage payment by a minimum of 125% to 140%+. For example, if your mortgage payment is £1,000, your rent would need to an absolute minimum of £1,250 per month.
• Your personal income, the lender will assess your personal income to see if you will be able to meet the mortgage payment on your own if the tenant does not pay.

For an accurate figure on exactly how much you could borrow on a buy to let mortgage, you’ll need to get in touch with an experienced mortgage broker for advice.

How buy to let mortgage work is that they provide finance for both first time buyer and experienced landlords to buy rental properties or remortgage/capital raise their existing investment properties.

How buy to let mortgage work is that they are very much like a traditional residential mortgage with a few differences, namely:

• They are usually interest-only to keep the payments down.
• How much you can borrow on a buy to let mortgage is based around rental income.
• Interest rates are typically higher than residential deals.
• A minimum deposit of 20%+ is required.

How the application process for a buy to let mortgage is very much like a regular mortgage also, documents such as your identification i.e. passport and proof of address, bank statements and proof of earnings will be requested.

To find out more about how buy to let mortgages work, your mortgage broker will answer all your questions and provide you quotations.

Buy to let mortgages can be both interest only or repayment, however, the majority of buy to let mortgages are on an interest-only basis in order to keep the costs of renting the property to a minimum to maximise profits.

With interest only mortgages, the balance remains the same throughout the term of the mortgage. At the end of the term, the full balance will need to be repaid as a lump sum.

If you are aged 50+ and are exploring your later life mortgage options, various products and services are available to you such as regular mortgages, retirement mortgages and lifetime mortgages.

An equity release mortgage is available to clients over the age of 55 who have equity in their homes. An equity release mortgage is not available on a buy to let property, for an equity release mortgage, the property will need to be your main residence.

How to change your mortgage to buy to let will depend on your plans with the property and how much equity you have.

How to change a mortgage to buy to let can be done in 3 ways:

1. Consent to let from your existing lender – This is a good way to start if you’re part way through a fixed rate deal.  Getting consent to let is a temporary measure for around one to two years usually until your fixed rate comes to an end. At the end of this period, you can then sell the property if it doesn’t have at least 20% equity or change your mortgage to buy to let.
2. Remortgage to a buy to let product with your current lender – For this, you’ll need a minimum of 20%+ equity. Your lender will offer you one of their in-house buy to let mortgage products, usually on an interest only basis for you to switch to.
3. Shop around and remortgage – You can search the market and remortgage to a buy to let mortgage product with a new lender. Your mortgage broker will search 1,000s of deals for you and recommend the best one.

Yes, it is possible to change your buy to let mortgage to a residential if you’re now going to live in the property.

A property owner might want to move back into the property on a temporary or more permanent basis, this is ok.

If your circumstances have now changed and you’re wanting to live in your buy to let property, you’ll need to let your mortgage lender know beforehand.  It’s against the terms and conditions of a buy to let mortgage to live in the property and doing so could have serious implications.

To change your buy to let mortgage to a residential for a short period, an agreement can usually be reached with your current lender, and they might allow you to stay on a buy to let mortgage deal with temporary variations.

To change your buy to let mortgage to a residential permanently you can either:

1. Stay with your current lender, this will be best if you’re in the middle of a fixed rate to avoid any early redemption fees.
2. Shop around with a mortgage broker to find the best deal for your personal situation.

If you are planning on buying an investment property and you can’t afford to buy it outright, you’ll need a buy to let mortgage to provide the funds.

How much you can borrow on a buy to let mortgage will depend on your experience as a landlord, how much deposit you have available, your income, your existing credit commitments, your credit score, and how much rental income you’ll receive on the property.

Landlords need a buy to let mortgage for various rental types including:

• Student lets.
• Professional buy to let.
• HMO (house in multiple occupation).
• Limited company purchases.
• Refinancing and capital raising.
• Auction & Bridging loans.
• Property improvements.

How you get a buy to let mortgage is determined by whether you go direct to your bank for mortgage advice or seek the help of an experienced mortgage broker.

We’d always recommend that you get a buy to let mortgage via a professional due to the complexity of the application and rules.

Your mortgage broker will have in-depth knowledge of lending criteria from many buy to let products and will be able to recommend the best one for you and your personal situation.

Getting a buy to let mortgage is more difficult than a regular residential mortgage due to the additional questions surrounding rental income, affordability, and the larger deposit that is required.

How much buy to let mortgage you can get will be calculated using 3 main figures:

1. How much rent you’ll receive from the property when it is let out, the more rent you’ll receive the more mortgage you’ll be able to get.  You can usually look online to find similar sized properties and see what they are renting out for.
2. How much income and outgoings you have personally, the higher your disposable income the more you’ll be able to borrow on a buy to let mortgage.
3. The amount of deposit that you have available to put down, the more you have the higher your purchase price can be.

To find out how much buy to let mortgage you can get it’s always best to speak with an experienced mortgage broker ahead of viewing any properties, it’ll save you both money and time.

For a buy to let mortgage you will need the following:

• A sizeable deposit, 20% of the property value as a minimum.
• Personal income, generally you’ll need to earn £30,000 per annum from either employed or self-employment.
• Money for fees, including stamp duty, legals, surveys, mortgage fees etc.
• A conveyancer to do the legal work.
• A mortgage broker (optional) to navigate you through the maze of lending criteria.
• Documents including, passport or driving licence, proof of address, bank statements, evidence of deposit, and evidence of income.
• Knowledge of how much rental income you expect to receive for your property.
• Patience, the process usually takes longer than a residential mortgage due to additional underwriting, also additional documentation may be requested.

No, it’s not easy to get a buy to let mortgage. You’ll need a larger deposit of at least 20% of the property value, many lenders will need you to be an existing homeowner, and your rent will need to cover your mortgage by a minimum of 125%+.

Is it easy to get a buy to let mortgage, no, however, having a professional mortgage advisor on your side will increase your chances significantly.

No, buy to let mortgages are not cheaper.  Although they may seem cheaper due to the majority of buy to let mortgages being on an interest only basis.

With an interest only mortgage, you’ll only pay monthly interest payments, and no capital will be repaid.  The entire mortgage amount will remain outstanding and will be due as a lump sum at the end of the mortgage term.

Buy to let mortgages are usually a higher interest rate than with a residential mortgage due to the additional risk and underwriting involved.

Yes, a buy to let mortgage is more expensive than a residential mortgage.  You’ll need a much bigger deposit, and the interest rate will likely be higher.

Putting down a bigger deposit will make the mortgage less expensive as you’ll be paying less interest, also, reducing the loan to value of the mortgage amount might allow you to qualify for a better interest rate deal.

Buy to let mortgages are more expensive in the way of fees also, there may also be a stamp duty surcharge due on your purchase.

Usually, a buy to let mortgage applicant is or has:

• Already a homeowner, although, first time buyer buy to let deals are available.
• Good credit history, although, specialist lenders can help with bad credit buy to let deals.
• A bigger deposit, a minimum of 20% of the property valuation will be required.
• Good personal income to afford the mortgage in periods of the property being unoccupied.
• Experience of being a landlord isn’t required, however, it will help when it comes to being accepted for buy to let mortgages.
• Age, buy to let mortgages are available until aged 80+.

The alternatives to a buy to let mortgage are:

• Buying with cash.
• Bridging loans, these work well for refurb projects or to provide auction finance.
• Secured loans on residential or other investment properties can also work well for un-mortgageable properties.

Often, if properties need a lot of refurbishments or they do not have a working kitchen and bathroom, alternative finance is required until the works are complete.  Once the works are done, you’ll then be able to remortgage to repay the alternative finance.