Buy to Let Mortgage
If you are ready to take your next steps as a landlord with a buy to let mortgage, we are on hand to help
Buy to let mortgages are sold specifically to those buying property as an investment to rent out, rather than to live in yourself. Buy to let mortgages are different to standard residential mortgages, with lenders preferring you to finance your purchase with a buy to let mortgage if you are planning to rent out your property. Whilst the rules surrounding buy to let mortgages are similar to regular mortgages, there are some major key differences.
Who is eligible for a buy to let mortgage?
The eligibility criteria for a buy to let mortgage differs slightly from a normal residential mortgage. You might be eligible for a buy to let mortgage under the following conditions:
- You earn at least £25,000 a year. Whilst you might be eligible with an income of less than this figure, you might struggle to get a lender’s approval
- You are over the age of 18, but under a certain age. Most lenders have upper age limits, often between 70 and 75 for when the mortgage ends
- You have a good credit history with a strong track record, and you aren’t overly committed to other debts or other borrowings
- You can afford to and understand the risks of investing in property
What are the main differences between a buy to let mortgage and a residential mortgage?
Typically, you will require a higher deposit for a buy to let mortgage compared to a residential mortgage. The larger deposit is needed as a safety net for the lender in the event that you default on your payments, often as a result of a problem with the collection of rent. As previously mentioned, most buy to let mortgages are interest only. Whilst this means that your monthly repayments are lower, you will need to pay the full capital debt at the end of the term, either by selling the property, paying off a lump sum or remortgaging. You will be liable to a higher stamp duty payment for a second property that is not your main home. As a result, some buy to let mortgage investors set themselves up as a limited company for taxation purposes.
What extra costs and fees should you budget for with a buy to let mortgage?
- Stamp Duty
- Surveyor’s fees and other buying charges
- Tax on rental income
- Building and landlords’ insurance
- Maintenance and repairs for the property
- (Possible) Ground Rent
- (Optional) Rent insurance
In addition to the extra costs and fees of being a landlord, there are certain responsibilities and regulations that you should be aware of.
Frequently asked questions about buy to let mortgages
- Can you have multiple buy to let mortgages?
The quantity of buy to let mortgages that you are eligible for is dependent on your mortgage provider and the amount they are willing to lend you. Every provider is different, some will restrict you to one or two buy to let mortgages at once, whereas others will allow you to take out as many buy to let mortgages as you can afford with regards to the deposits and rental income.
- Can a residential mortgage be changed to a buy to let mortgage?
You can, however you will need your lender’s approval. Due to the differences between residential and buy to let mortgages, this isn’t a decision that you should rush into. It is highly recommended that you speak to an adviser to discuss all of the options available to you.
- What happens at the end of an interest-only buy to let mortgage?
As you only pay the interest on buy-to-let mortgages, at the end of the term you will have to repay the full value of the mortgage. You may decide to sell the property, or you might be able to extend your mortgage. Should you choose to sell the property, if house prices have risen since you took out the mortgage then you could profit. However, if house prices have fallen, you will still need to pay the remainder of the mortgage value yourself.
Start your Buy to Let Mortgage process with us
As we are not tied to any specific lender, we can make sure that we help you to select the right mortgage for you and your property. Call us for an initial, free of charge consultation. There is no obligation to use our services and you can meet in one of our offices in Horsham and Southwater, or arrange a phone based appointment.
YOUR HOME MAY BE REPOSSESSED IF YOU DON’T KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER DEBT SECURED ON IT
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