We understand that purchasing a property to let requires specialist advice. At The Residential Mortgage Hub we believe that your journey should be one of simplicity, choice and expertise.

Whether you are considering a Buy-to-Let for the first time or you are an experienced landlord, we will ensure that you receive the right advice and guidance.

Buy-to-Let mortgage help

There are a few things to understand before we get started.

A Buy-to-Let mortgage is a type of mortgage specifically for properties that are owned or purchased with the intention of renting them out.

They’re often set up on an interest-only basis, which means you only make monthly interest payments each month. The outstanding loan balance – i.e. the amount you borrow – doesn’t reduce and is paid back at the end of the mortgage term via a suitable repayment vehicle, usually the sale of the property.

If you rent out a property on which you only have a residential mortgage, you’ll be in breach of your mortgage agreement which could put your property at risk of repossession. To rent out your property without breaching your mortgage agreement you’d have to either obtain consent to let from your existing lender or switch to a Buy-to-Let product.

We explain more about how buy-to-lets work in our guide.

Even the cheapest Buy-to-Let mortgage rates tend to be a little higher than the rates on residential properties as Buy-to-Lets are riskier investments for lenders.

For example, if you have a mortgage on your home and a mortgage on a rental property, but you find yourself able to make only one of these monthly payments, it’s very likely you’ll prioritise the mortgage payment on your home over the one on the rental property.

Therefore, to compensate for the additional risk, Buy-to-Let lenders set interest rates slightly higher. They also usually require a bigger minimum deposit – usually at least 25%.

The amount you can borrow and the rates available to you will depend on the size of your deposit and your expected rental income, as this will determine how much you’ll be able to afford in monthly interest payments.

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    Keep reading to find information on the process and for answers to some of your main FAQ’s.

    You can also learn about the different types of mortgages and interest rates in our guide.

    Buy-to-Let: Frequently Asked Questions

    Lenders have different rules regarding how many mortgages you can take out with them for Buy-to-Let properties. There are also some limits based upon your entire portfolio, including any properties mortgaged with other lenders. Many high street lenders cap the number of buy-to-let properties at 3 – 5, but there are some lenders that work exclusively with portfolio landlords who own 4 + properties.

    A Buy-to-Let mortgage is generally available on a wide range of property types, although there will always be a number of styles of accommodation that need a specialist approach or indeed will not be suitable.

    Leasehold properties are perfectly acceptable subject to the terms of the lease. Normally, any remaining term on a lease would need to be at least 70 years. A shorter term will affect the term of the mortgage and potentially the current value of the property. In the event that the lease is not suitable because of the term, a new or extended lease may be negotiated with the current owner and the Landlord.

    As with a standard residential mortgage, mobile homes and houseboats tend to be excluded by lenders as suitable security.

    Certain types of property may need consideration by a speciality or niche lender.

    For example;

    • Studio Flats with a very limited living space.
    • Ex Local Authority Flats in larger blocks and/or with deck access.
    • Flats above certain types of commercial property, typically fast food outlets.

    A lender may also take into account any other property you have in the same street/postcode area in order to limit their risk and exposure to that area.

    As each lender will have a different approach to certain types of property, contact us to discuss your specific situation and we will guide you through the process. By doing this, you are more likely to avoid the disappointment of being declined by several lenders before the correct solution is achieved.

    You can apply for consent to let on your residential property from your current lender if you only intend on renting it out for a certain period of time – e.g. a year. Alternatively, if you want to let out your current home indefinitely and maybe release some equity from it at the same time to buy a new home, you’ll want to consult a mortgage broker about letting to buy.

    It is possible for a first-time buyer to take out a mortgage on a Buy-to-Let property but there are very few lenders available that offer these kinds of niche products, so you may want to consult a mortgage broker.

    Buy-to-Let Mortgages are normally available to people who already own a residential property or live in their own home, either with a mortgage or totally unencumbered.

    However, there is an increasing number of people who either live with friends/family or rent themselves and have in fact bought property to rent out, in order to maintain a place on the property ladder. There are a number of lenders who are happy to do business with applicants who “own” property rather than “own/occupy”. You will need to provide full details of your current investment portfolio together with rental and income evidence.

    It may be more difficult to get a Buy-to-Let Mortgage as a First Time Buyer, but it is by no means impossible. A lender would normally expect you to be able to afford the loan on a residential basis.

    As well as borrowing money in your personal name, mortgages are available to Limited Companies that are specifically created for the purpose of owning and renting property. These “Limited Company” Buy-to-Let products may be suitable for some borrowers more than others depending on individual tax status and investment objectives. It is very important that you understand the main differences. Good advice from a suitably qualified accountant or tax specialist will help with this decision.

    There are a few Buy-to-Let lenders that offer LTVs (loan-to-values) higher than 75%. You may want to speak to a mortgage adviser if you’re after one of these slightly more specialist mortgages as they tend to be relatively expensive.

    Owning a Buy-to-Let property is an investment opportunity many people aspire to and indeed thousands of people successfully venture down this road. For those would be investors who find themselves with a history of bad credit this however could just appear a pipe dream. The good news is that just as with a residential mortgage there are lenders in the market that will look to assist these potential investors.

    The short answer is yes. Leasehold property is no different to Freehold property as long as there is a suitable Lease in place. Leasehold property does have associated costs and charges, such as Ground Rent and Annual Service / Maintenance Charges, which are made in respect of the upkeep of communal areas and services carried out by the Landlord.

    The term remaining on the lease may have an impact on the value and suitability for mortgage purposes. A lease with a term of less than 70 years remaining is likely to result in a lower valuation of the property and subsequently a reduced mortgage amount and term. A new or extended lease is the usual method of dealing with this issue. This is negotiated with the current owner and the Landlord

    Any Leasehold related charges are taken into account by the lender as a regular commitment and will be factored in to the affordability calculator used when looking at the amount that may be borrowed against the potential rental income. It is therefore vital that you familiarise yourself with any ongoing costs and establish whether these are likely to increase and therefore limit the net income of the investment.

    Consideration should also be given to the owner of the Freehold. In the past, investors may have owned a leasehold property and also have in interest in the Freehold of the Building. However, this is becoming less popular with lenders who are no longer happy to accept this if the leaseholder has a significant stake in the Freehold.

    Buying a new build property is treated exactly the same for Buy-to-Let as for new build owner occupied mortgages.

    Minimum deposits are required and the proposed rent will need to be sufficient to satisfy the lender affordability calculation.

    There may be some benefits to buying a newly built property, particularly the lack of ongoing maintenance in the early years which gives the opportunity for greater profit. There may also be some added incentives such as vendor purchase price/fees contributions including flooring and possibly white goods.

    For many Buy-to-Let Investors a mortgage is a necessity and as such is a cost that needs to be factored into the budget. The amount of the monthly payment is therefore a critical part in determining the overall surplus income the property provides and ensuring you have the most appropriate mortgage product for your individual needs is therefore extremely important. For many Buy-to-Let mortgages the product, whether this be a fixed or variable rate, will have an end date when at which time the loan will revert to the lenders standard variable rate.  As the lenders standard rate is likely to be higher than the rate that is to finish, many Buy-to-Let mortgage customers will look to secure another scheme most appropriate to their needs in readiness for when this is to happen.

    The process many borrowers adopt when looking at a new rate is to look at other lenders and consider a remortgage, i.e. change from one lender to another.  Whilst this is an option that must be considered, here at The Residential Mortgage Hub we not only do this when looking at the new scheme but, we will also consider what your current lender may be able to offer you as an existing customer via a product transfer. We will then recommend what is best suited to your borrowing needs. The overall cost is the main factor but other possible benefits of us recommending you remain with your current provider may be:

    • No additional underwriting
    • No recalculations of loan amount permitted based on rentable income
    • No property valuation required (unless it is to your advantage to do so and the lender offers this facility)
    • No solicitors required
    • Reduced paperwork for you

    Buy-to-Let mortgages can be a very complex area which do require specialist mortgage advice. Lenders have varying criteria as to how much they will lend whether it be different stress testing, age related, the maximum number of properties that can be held by an individual or Ltd company. These are a few of the factors that have to be taken into account when choosing a Buy-to-Let lender for our clients. It is most important not to apply to too many lenders as this can affect your credit rating, this is where a mortgage broker who understands the Buy to Let market can assist in order to reduce the chances of this happening.

    Here at The Residential Mortgage Hub, we have the specialists who can assist you, let us do the hard work for you!

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