Buy-to-let mortgages

Because we consider ourselves non-investment financial advisers rather than mortgage brokers, we offer our investment clients a lot more than just securing the most suitable mortgage in the marketplace.

If you’re thinking about buying a property with the sole purpose of renting it out, you’ll need a specialist buy-to-let mortgage. As a first-time landlord, a portfolio investor, or maybe you’ve become a landlord by accident, we can help you find the right mortgage for your needs.

Buy-to-let mortgages work in a similar way to residential mortgages. The bigger the deposit you can provide the better the range of mortgage deals available but there are some important differences.

·      Mortgage fees are higher because of the additional risk associated with rental properties

·      The minimum deposit required is higher, between 20% and 40%

·      How much you can borrow is calculated based on the monthly rental amount you can charge for the property

·      Upfront fees tend to be higher and the affordability criteria are quite strict

These are areas we discuss with you to fully understand your circumstances and requirements. The attraction of a low-interest rate product needs to be balanced against the overall fees that will be included. It can be more expensive when you look at the total package. As an independent mortgage broker, we can review the whole of the market to find the best product to suit your needs.

What you should consider for a buy-to-let mortgage

These types of mortgages are generally provided as interest-only products. This means you will only pay the interest each month and not reduce the loan amount. You’ll need a plan in place to repay the loan at the end of the term which could just be selling the property but we can help you with all this.

Lenders will consider the following criteria: 

·      Homeownership, most lenders prefer you to be a homeowner but if you’re not then it’s still possible if you approach the right lender.

·      Lenders will look at the income you derive from non-property interests. Specialist lenders do not require any other form of income but high street lenders may require you to have up to £25,000.

·      Require a good credit rating, your financial circumstances will be assessed as part of this process

There are other areas you should also consider. The rent you’re paid by tenants is liable for income tax, but you can offset this against the fees from letting agents, property maintenance charges, and council tax. The rules and regulations around buy-to-let mortgages have become more complex but we can provide you with advice and guidance throughout the process.

Becoming a landlord by default

Not everyone sets out with a goal to invest in property and become a landlord. If you’re paying a mortgage on a property and your circumstances change unexpectedly you need to consider the implications. This could result in you having to move out and rent the property or maybe you’ve recently inherited a house.

In this situation, if there is a mortgage on the property you would need to tell your mortgage lender. It’s possible to be granted a ‘consent to let’ approval on the existing mortgage or you may have to switch your product. We can discuss your circumstances with the lender and find the best solution for you.

Landlord insurance

Protecting your rental property is important but it needs to be specific buy-to-let insurance. This will provide you with cover for your property, the contents if it’s furnished, and your landlord liability.

Most mortgage lenders will require you to have insurance to protect your property from damage. The contents are not part of this but if you have carpets, curtains, and furnishings as part of the rental, it’s a good idea to insure against loss or damage. The items your tenant brings into the property will not be covered but they can arrange their contents insurance.

Landlord liability will cover any tenant or visitor that is injured or dies within your property. Not all lenders have this as a mandatory requirement, but it’s worth knowing that it’s more likely to be needed if you’re renting to students.

Frequently asked questions 

Q. Can I live in my buy-to-let property?

A. No, this would be a breach of your mortgage conditions and the lender will be in their right to repossess the property.

Q. What is a portfolio landlord?

A.  A portfolio landlord is defined as a person owning four or more buy-to-let properties. They are assessed for new mortgages slightly differently than mainstream buy-to-let mortgage applications.

Q. Is it more difficult to get a buy-to-let mortgage than a residential mortgage?

A. In some ways it can be easier as not all buy-to-let mortgages are regulated by the Financial Conduct Authority. If you fit the criteria it can be quicker than a residential mortgage and we can help with both types of mortgage.

Q. Do I have to have to go through a letting agent to rent my property?

A. No, you don’t have to go through a letting agent you can manage your rental property yourself. The reason people choose to use a third party is to save them time and in some cases the hassle of dealing with maintenance issues and tenants.

Q. Can I rent to a family member?

A. Yes but you need a special type of buy-to-let mortgage classed as a consumer buy-to-let mortgage. If you rent to a family member under a mainstream buy-to-let mortgage, you would be breaching your mortgage conditions and it could lead to the lender repossessing the property.

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