MORTGAGES
Buy to Let
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Buy to Let Mortgages - What you need to know
There is more than one reason why a person might want to buy a property. The most common reason is to live in the house themselves, but not far behind is buying a property with the intention of renting it out to tenants. This is an excellent way to build a healthy, long-term financial future. Of course, these types of properties can be just as expensive as any other type of property. In order to buy one, then a person may get a Buy to Let mortgage. This is a type of mortgage specifically designed for people who are buying properties with the sole intention of renting it out for others to live in. On this page, you’ll find all the essential information you need to know if you’re thinking about undertaking this process.
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Who can get a BTL Mortgage?
In theory, anybody can get a BTL mortgage. It’s just that they’ll have to meet some requirements first. The first is pretty obvious: if you want to get a BTL mortgage, then you must be willing to buy a property and let it out. You can’t get this type of mortgage if you’re going to live in the property yourself. You should also be a current homeowner and have a good credit record. In general, you’ll have to earn at least more than £25,000 a year, though this isn’t always strictly necessary. There are mortgage lenders who don’t ask for a minimum salary. While it’s not a requirement, it’s important that anyone applying for this type of mortgage understands the risks involved in investing in property.
How do BTL Mortgages Work?
BTL mortgages are straightforward. If you have an idea of how regular mortgages work, then you’ll be on the right path! However, there are some key differences. The costs and charges can be higher. This is because the property that’s being bought will be rented out for profit, so it’s more of an investment than just buying a property to live in. One key difference is that the majority of BTL mortgages are interest-only. That means that the monthly payment just involves the payment of the interest on the mortgage, not the capital itself. When the time of the mortgage has expired, the mortgage is paid in full. There are other options, however — some brokers offer these types of mortgage on a typical repayment plan.
In order to get a BTL mortgage, you’ll have to put down a deposit of around 25% of the value of the property. But this can vary; while 25% is standard, it can sometimes go up to as much as 40%.
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How much can you borrow on a BTL Mortgage?
There’s no hard and fast rule when it comes to how much you can borrow. It all depends on the property in question, and most specifically, how much you can expect to earn from rental. This is something that the borrower can figure out before they approach brokers. Of course, how much rent a property will receive will depend on various factors, including where it’s located and the condition of the property (or what the condition will be like by the time it’s on the market). In general, lenders will ask that you’re charging 25% or so more than the cost of the mortgage.
Where can you get a BTL Mortgage from/How can a Mortgage Broker help?
There are many companies out there that offer a BTL mortgage. As with everything, some will be more suitable for your needs than others. To make sure sure that you end up with a mortgage that’s right for your needs, it’s recommended that you work with a specialist mortgage broker. They’ll be able to take a look at all the options available, and put the best deals on the table for you.
Why Choose Us
Planning for when there is no rent coming in
It doesn’t matter how robust the rental market is right now; things can always change. As such, it’s important to top up your savings account while you have tenants, to cover the times when you don’t have tenants. It’s also important not to rely on selling the home if you have troubles renting, since house prices can fall.
Buy to Let and Tax implications and Advantages
You will have to pay tax on your rental income. But there are advantages; for example, you can deduct the costs associated with certain property expenses, including letting agent fees, insurance, and utility bills. Important maintenance tasks can be deducted too.
How it Works
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We handle all the necessary paperwork and help manage your entire mortgage process
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FAQ
A mortgage is a loan from a bank or building society that allows you to purchase a property. The loan is repaid over several years with interest dependent on your personal financial situation.
A mortgage can be between one or more people. However, if you do not keep up your repayments, the lender can repossess your property.
All mortgage lenders have their own requirements. The following factors take a part in whether you will be given a mortgage offer, and how much the lender is willing to borrow you:
- Amount you wish to borrow
- Size of your deposit
- Employment status and income
- Credit rating
- Outgoings
- Existing debt
- Your age
- Length of the mortgage term
- Your credit status
- If you are applying solely or jointly
To be accepted by a lender, you need to assure lenders that you can repay your mortgage. One main aspect lender’s look at is your credit report to check your repayment history. Your credit file will include current and existing records on items such as credit cards, loans, overdrafts, mortgages, mobile phone/s, some utility payments and all accounts that have been open in the last 6 years. If your credit report shows arrears, defaults, CCJs, debt management plans or bankruptcy in the past, there are mortgage options available which we can help you with.
To get a mortgage you will need to save a deposit of at least 5%, but the more you save, the better your mortgage rate will be. If you have an existing property you own, you can use the equity in your property for this. Our skilled mortgage advisors can talk and guide you through the benefits and the difference in your monthly payments by increasing your deposit.
As soon as you have found the property you want to buy, our mortgage brokers will evaluate your personal needs and situations and recommend a mortgage product that is right for you. They will compare a wide variety of mortgage quotes, including products that cannot be found on the high street or comparison sites. This guarantees that you get the right deal at a right price.
If you agree to the mortgage product your advisor suggests, you will receive your Agreement in Principle (AIP). This will provide you with an estimated total of how much the lender is willing to borrow you and allows you to put an offer in on your ideal home.
If your offer is accepted, you will need to arrange a solicitor to deal with searches, surveys and contracts, which we can arrange for you. We manage the entire mortgage application process through to completion, liaising with your solicitor and lender to make sure your application is successful.
There are different mortgage options such as a remortgage. In this case we would recommend looking for a new mortgage deal approximately 3 months before your current deal expires. By beginning the mortgage process early it will allow you to prepare ahead of time to compare all the available mortgage products and submit your application. Do not worry if your mortgage is approved early as we will ensure that the completion date corresponds with your current deal’s end date.
A lot of mortgage lenders will lend you up to five times your salary. However, this all depends on several factors including your age, number of dependants and current financial commitments. Lenders will work out how much they will lend you based on what you can reasonably afford each month after you have paid your bills, credit cards, loans etc.
In addition, our mortgage advisers will assess your individual needs and situations to see how much you can realistically borrow before an application or credit search is completed. If you choose to continue with the application, our advisers will understand which mortgage lenders to approach to ensure you get the required loan amount.
In order to buy a property with a mortgage, you will need to save a deposit of at least 5%. However, the more you can save, the better your rate will usually be. There are a few exceptions to this as follows:
- If you already own a home, you can use the equity from your property for the deposit
- If you are a council tenant and are looking to buy your current home under the Right to Buy scheme, most mortgage lenders will now accept your Right to Buy discount as a deposit.
As property prices increase, first time buyers are struggling to save enough money to buy a home. In cases like this the government has therefore introduced ‘Help to Buy’ to allow first time buyers to get on the property ladder.
Our expert mortgage advisors are aware of various mortgage deals available and can help you decide which mortgage deal best fits your needs.
When buying a home, you will need to save enough money to pay for other factors and not just your mortgage deposit. This also includes paying for your mortgage fees, moving costs and legal expenses. We have listed below all the possible purchase and moving expenses you may have to pay, to help you with your budgeting. The exact fees and amount you will pay, is dependent on the value of the property you are buying and your chosen mortgage lender.
Mortgage booking fee: Some mortgage lenders will charge this to secure a fixed-rate or tracker deal.
Cost: £99 – £250
Mortgage arrangement fee: Some mortgage products will incur a mortgage arrangement fee, in addition to the mortgage booking fee. This fee is either paid upfront or added to your mortgage debt. If you chose to add it to your mortgage, the cost will increase over the lifetime of your mortgage.
Cost: £1,000 – £2,000
Telegraphic transfer fee: Needs to be paid to the lender to transfer the amount you are borrowing for the mortgage to the seller’s solicitor.
Cost: £25 – £50
Mortgage broker fee: If you use a mortgage advisor to arrange your mortgage for you, you will need to pay a fee or commission, depending on the value of your mortgage.
Cost: £197- £597. However, this may vary if you need to use a specialist lender
Valuation and survey fees: Charged by the lender to value the property you are buying. The cost varies according to which survey you choose:
Home condition survey: Most basic and cheapest of all the surveys and often used for new-builds.
Cost: £250
Homebuyer’s report: More in-depth survey, assessing the inside and outside of the property, and also includes a valuation.
Cost: £400
Building survey: A complete survey generally used for older or unconventional properties. Although they are the most expensive, they are certainly worth considering, as it could potentially save you a lot of money if any structural problems are found with the property.
Cost: £600
Higher lending charge: Can be charged by lenders if you borrow most of the value of the property.
Cost: Approximately 1.5% of the amount you borrow
Searches: Your solicitor will arrange for the local authority to check whether there are any issues that could affect the property’s value. The local council can charge a fee for carrying out these searches and may also request that a drains search be done at the same time.
Cost: £250 – £300
Legal costs: You will need to instruct a solicitor to carry out the necessary legal work for you.
Cost: £850 – £1,500 plus VAT
Stamp Duty Land Tax (SDLT): Charged on all purchases of UK land and property over £125,000. However, the amount you will pay is dependent on the purchase price of the property you are looking to buy, and whether you have owned a home before as follows:
First home: First-time buyers are exempt from paying SDLT on the first £300,000 of the purchase price of a property up to the value of £500,000. All purchases in excess of £500,000 will pay the standard stamp duty rates as follows:
- £0 – £300,000: 0%
- £300,001 – £500,000: 5%
Next home: If you are currently or have previously been a homeowner, you usually pay SDLT on increasing portions of the property price:
- £0 – £125,000: 0%
- £125,001 – £250,000: 2%
- £250,001 – £925,000: 5%
- £925,001 – £1.5 million: 10%
- £1.5 million+: 12%
Second property: If you are looking to buy an additional property, you usually have to pay 3% on top of the normal SDLT rates as follows:
- Less than £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1.5 million: 13%
- £1.5 million+: 15%
For example, if you buy a next home for £275,000 the SDLT you owe is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT = £3,750
Information correct as of October 2021 – Source: www.gov.uk/stamp-duty-land-tax
Removal costs: Paid to the removal firm (if you choose to use one) to pack, transport and deliver your possessions to your new home.
Cost: £300 – £600
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