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Buy to let (BTL) mortgages have been on
offer in the UK since the late nineties;
they are specifically designed for investors
to borrow money to purchase property in the
private rented sector in order to let it out
to tenants. Lenders take different
approaches. The amount of money investors
can borrow is determined by the rental
valuation of the property. Usually the
annual rental income has to cover a certain
percentage of the mortgage repayments,
somewhere between 120% and 150%. This is to
allow surplus rent to cover other costs such
as property maintenance and void periods
(periods when there are no tenants living in
the property and therefore no rental
income). Buy to Let Mortgage frequently asked
questions click here.
Typically the interest rates that are
offered on Buy-to-let mortgages are fairly close to
residential mortgage rates but will on
average be higher and typically charge
higher fees. This is due to the perception
amongst banks and other lending institutions
that BTL mortgages represent a greater risk
than residential owner-occupier mortgages.
This type of investment has become very
popular in the UK over the last five years
or so, as house prices have dramatically
increased. Another reason for their
popularity is the tax advantages that are
available to UK BTL investors. Rental income
is considered in the same way as salary, and
is therefore often taxed at 22% or even 40%.
However, landlords can deduct costs from the
taxable portion of their rental income, and
these costs can include the interest portion
of their Buy to Let mortgage repayments as well as
maintenance costs on the property. This tax
set-up has made BTL investments more popular
over the last few years. If you want to
find out more about
your current credit
status click here or using are "Credit
Status" icon above
To get a quote from our specialist
Buy to Let Mortgage partners please complete our simple
online "Mortgage
Finance
Solutions Enquiry" forms which asks for some very
basic information to help them assess your
needs. Alternatively
look at our
Finance
Links page which may have
alternative "Finance Solution"
providers. Buy to Let
Mortgage Frequently Asked Questions
- What is a buy to let mortgage?
A Buy to Let mortgage refers to a loan
that is used to purchase property in
order to let it out. A buy to let
mortgage is typically interest only, and
available up to 85% of the value of the
investment property.
- What type of loan is a buy to let
mortgage?
In the past, a landlord wishing to take
out a mortgage on a property for the
purpose of producing an income would be
viewed by a lender as having a
commercial interest. This used to result
in higher rates of interest for
borrowers seeking to “buy to let”.
- How is a buy to let mortgage loan
arranged?
A Buy to Let mortgage does not differ
massively from a standard private
owner-occupier mortgage. Borrowers
taking out Buy to Let mortgages are
subject to the usual standard checks.
Generally speaking, most lenders will
require your rental income to be 125% of
the mortgage interest repayments. For
example, If you were paying off a buy to
let loan of £1000 per month, you would
need to be clearing rent of £1250.
- What should I look for in a buy to
let mortgage deal?
Most lenders will expect that the rental
income on the property will exceed the
mortgage repayments. The level at which
this becomes acceptable varies between
lenders. Some lenders will consider the
rental income, whereas others will only
be interested in your standard income.
- Does my credit rating influence
my buy to let mortgage loan application?
Although in theory a buy to let loan is
secure because of the rental yield and
the capital value stored in the
property, in reality the higher the risk
you represent to the lender the higher
the interest rate is likely to be.
Think carefully before
securing other debts against your home. Your
home may be repossessed if you do not keep
up repayments on your mortgage. |
