Buy To Let Mortgages
Buy to Let Mortgages are those used for the purpose of buying any type of Residential property, such as a Flat or a House, so that someone else can live in the property, and you can receive a regular rental income from them.
The process of buying a property for Buy to Let (Investment) purposes is exactly the same as if you were buying your own home. Please read through the Home Purchase or First Time Buyer Pages to see the details of that process.
With Buy to Let Mortgages and the buying of Investment property, there are some additional areas you need to consider :
Some Buy to Let Mortgages are not currently regulated by the Financial Conduct Authority, typically those bought purely for the purposes of investment. As such you will have more limited protection compared to a Residential Mortgage. The majority of Mortgage Brokers have to be Regulated, and will adopt a ‘Regulated’ approach of advice and recommendation, simply to deliver the same consistency of advice whatever type of mortgage it may be.
Unlike Residential Mortgages, the use of Interest Only Mortgages is account for the vast majority of Buy to Let Mortgages, and are perfectly acceptable (even preferred) by lenders.
Why? The correlation between the mortgage payment and the rent received is carefully considered with Buy to Let mortgage Lending, and lenders prefer to have a good ‘gap’ between your monthly mortgage payments and the rent.
Also, should you have any void periods where a tenant may not pay their rent, or you may be between tenants, you will still have to keep paying the mortgage payments, so the ability to keep those payments low, and also to use any surplus funds from previous months, will mean there is no pressure on your own mortgage and day-to-day bills.
Lastly, the mortgage interest is the only element of the mortgage which is ‘Tax-Deductible’, and not the capital element of a mortgage payment. As such, it just makes it some much easier for you and your accountant to work out how much tax to reclaim.
You can have a Repayment Mortgage if you wish, and for some that is the right thing to do still, but just be mindful of what you re looking to do with your investment.
The level of rental income is important of course, it’s your income at the end of the day too!
A Mortgage lender will be looking at your ability to continue to pay the mortgage should interest rates be significantly higher than they are at the moment, and a little extra in reserve.
Typically we will need to know the gross monthly rental income, so if you are looking at a new property please make sure you ask for that information.
Some lenders also allow for personal income to be combined with the rental income, to allow the mortgage to be both affordable and accepted.
Although the rental income needs to more than cover the mortgage cost, lenders are looking much closer to the relationship between your declared income and the amount of mortgages you may have.
Most lenders want a minimum of £25,000 income per year before they will look at a Buy to Let Mortgage for you – if you have a low declared income and a significant amount of mortgage finance, this might restrict the lenders you have access to.
For clients that only have Rental Income, such as a Portfolio Landlord, we will need to see your Tax Returns and Summary of Income Calculations (previously SA302’s) – so please make sure your income is accurately recorded with HMRC.
Typically family houses and flats – where you would only need one Tenancy Agreement.
HMO – Houses in Multiple Occupancy
Where you have a larger property that is set up for a ‘Per Room’ tenancy, with some shared facilities. Typically the properties are more expensive, but the returns can be greater as well. There is a more limited number of lenders and mortgage options, however the additional rental income you receive more than outlays any extra costs.
Shops / Offices / Commercial
Whether a mixed use unit, or a specific shop or office unit, you can get commercial finance for the purchase and subsequent leasing. Please forward us details of what you wish to purchase as each opportunity will need to be assessed on its own merits, and terms may be personally priced.
We can help in all these situations – the more complicated the property, the less lenders will be interested and the cost of the finance may be higher.
Whatever property you decide to buy, the condition of the property is really important if you need a mortgage to finance the purchase.
The majority of Buy to Let Mortgage Products are designed for properties that are deemed to be ‘Ready to Let’ almost immediately.
However, there are an increasing number of properties that are coming to market that need a reasonable level of ‘Refurbishment’ before they could be let, such as a new Kitchen, Bathroom, Decoration, even some structural repair.
With such properties we will need to consider products designed for Refurbishment – the number of options are quite limited and the cost of the mortgages are a little higher, but if you are buying a property that needs some work then the chances are you are buying at a discount. Please check with us before you look to make an offer on such a property.
Again we have lenders that will help with a Refurbishment opportunity, typically short term finance that is repaid once the property is in a condition suitable for a normal Busy to let Mortgage – please ask for details.
Essex Home Finance Ltd is authorised and regulated by the Financial Conduct Authority under number 940123.
Registered address: Suite 1, 8 Kingsdale Business Centre, Chelmsford, Essex, CM1 1PE
Registered in England & Wales under number 10607263.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We do not charge for Residential First Time Buyers, Residential Home Movers, Residential Remortgage, and all Product Transfers (Residential or Buy to Let).
There will be a fee for all Buy to Let Purchase and Buy to Let Remortgage cases. Typically our fee will be £149, payable on Offer. We will agree any fees with you before we proceed with your case.
There will be a fee for all Equity Release Mortgage cases. Typically our fee will be £695, payable on Offer. We will agree any fees with you before we proceed with your case.
We always aim to provide a high quality service to our customers. However, if you encounter any problems and we are unable to resolve them you can take your complaint to an independent Ombudsman.
Our advice is covered under the Financial Ombudsman Service.