Mortgage Advice

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Remortgage Advice

Buy to Let Mortgage

Buy to Let Mortgage

Expert Advice on Buy to Let Investments & Mortgages

If you have property that you want to rent out and want to become a landlord, you will need to get a Buy to Let (BTL) mortgage. Whilst there are similarities between Buy to Let and normal, residential mortgages there are some key differences between the two.

Whether you’re thinking about purchasing your first buy to let property or adding to a portfolio, securing the right Buy to Let mortgage is essential to maximise your potential profit.

Your mortgage repayments will be your biggest ongoing cost of your buy to let property. To give your investment the best potential - use a qualified mortgage adviser to help find you the most suitable deal for your circumstances.

The Mortgage Hut team is here to help you to secure the right buy to let mortgage to help you achieve competitive returns on your financial investment.
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What is a Buy to Let Mortgage?

A buy to let mortgage is a mortgage product specifically for properties which are being let out. They typically require a larger deposit and have higher interest rates and arrangement fees than normal mortgages. The amount you can borrow is usually based on the amount you will be able to let your property out for. You will may need to consider a buy to let mortgages if you are:

  • Buying a house to let out for additional income/investment
  • Purchasing a holiday home which you intend to let out
  • An accidental landlord - resorted to letting out a property that you have been unable to sell

How do they work

First of all, the fees on Buy to Let mortgages are usually much higher than they would be on a residential mortgage, and so are the interest rates. Most mortgages of this type are also interest-only, too. This means that when you make your mortgage payment, you will only be paying off the interest each month – not the mortgage itself. You will have to pay the capital, or actual mortgage amount off at the end of the term.

This does have some benefits. Interest-only monthly payments are cheaper than your usual repayment mortgage payments, and you can usually offset a certain percentage of the mortgage interest against your tax bill. The minimum deposit for a Buy to Let mortgage is usually 25% of the property’s value, although it can vary between 20-40%.

Can Anyone Get a BTL Mortgage?

landlord-giving-keys-to-tenants
There are a number of criteria that you will need to meet before becoming a landlord. Firstly it's important to ensure you can afford to take the risk of property investment as there will be periods of time where your property won’t have a tenant and you will be responsible for repairs.

Your credit score is also massively important and you’ll need to be sure that your report is positive and reflects well on your spending and money management by not doing things like maxing out credit cards and missing payments.

Your salary and age are also important too. Ideally, you need to be earning a minimum of £25,000 per year and be under the age of 75 when the mortgage will potentially end, otherwise you may struggle to find a lender to process your mortgage. For example, if you’re 35 years-old at the time of application and take out a 35-year mortgage, you will be 70 years-old when the mortgage finishes.

How Much Can I Borrow for a Buy to Let Mortgage?

This all boils down to the amount of rental income that you’re expecting to receive from the tenants of the property. Usually, the income needs to be at least 25-30% higher than what you’re paying for the mortgage. To determine what your rent will be, you will need to talk to local letting agents or do your own research by looking at similar properties online.

Don’t compare what you can borrow on a Buy to Let mortgage to what you would be able to borrow on a residential mortgage. The rates of buy-to-let mortgages are often much higher as property investment is perceived as a greater risk to lenders, meaning your borrowing power for a buy-to-let mortgage will be lower.

Why Choose Buy to Let as an Investment?

Try not to let the recent loss of tax relief and increase in stamp duty for buy to let property put you off this kind of investment, there is still money to be made, it is a matter of doing your sums right and keeping costs such as mortgage repayments as low as possible. 

  • Current low interest rates on savings accounts and bonds
  • Record low interest rates on buy to let mortgages equal more potential profit from your investment each month.
  • Property has the potential for a large increase in value through renovation or redecoration.
  • Plenty of demand for rental properties especially in certain areas of the country.
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Tax Implications with Buy to Let Mortgages

There could be. If you sell your buy-to-let property and make a profit, you will be liable to pay Capital Gains Tax (CGT) if your profit exceeds certain thresholds. And if your rental income that exceeds your mortgage interest payments and many allowable expenses are also liable to income tax. This is just the tip of the iceberg when it comes to buy-to-let mortgages, so if you’re thinking about becoming a landlord, get in touch with our expert advisers and they will be able to walk you through the next steps.

What About Stamp Duty?

For buy-to-let properties, Stamp Duty Land Tax (SDLT) is an additional 3% on top of the usual SDLT rate bands for properties above £40,000. It is important, however, that you avoid the temptation of assuming that you’ll simply be able to sell your property to repay the mortgage as it’s a dangerous game to play. If house prices fall, for example, you won’t be able to sell it for as much as you originally thought and, if this happens, you’ll have to make up the difference on the mortgage.

Find your ideal buy to let mortgage at the Mortgage Hut

If you’re looking for buy to let mortgages, the Mortgage Hut can make your dreams of buying a rental property a reality. If you need help finding a mortgage provider who can save you time and money, the search ends here. Why not call The Mortgage Hut today on 0300 303 2640 or request a call back and we’ll use our experience and expertise to get the right self employed mortgage for you.

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