Buy-to-let mortgage specialists
We arrange buy-to-let finance for a single residential property or commercial, to an entire property portfolio. If you're a property investor, accidental landlord or a first time buyer, we help secure BTL mortgages and remortgages on UK property.
Our Buy-to-let mortgage service
- Market-leading Buy-to-let mortgages and remortgages from £250,000 to £250m
- Market leading interest rates
(Lower rates for £700,000+ loans or less than 50% LTV) - LTVs up to 75%
- Terms from 3 years up to 30 years
We provide a professional experience-backed service to help you get the BTL mortgage you need at the best available rates.
We consider all types of credit history including non-status, bad or adverse and don't perform automated credit checks so there's no footprint from enquiring.
BTL mortgage uses
Buy-to-let residential property
BTL mortgages for residential property purchases and remortgaging, including HMOs, accidental landlords, holiday lets and portfolio landlords.
Buy-to-let commercial property
BTL mortgages for commercial property purchases and remortgaging including semi-commercial properties.
UK expat and non-UK citizens welcome
BTL mortgage lending criteria
| Loan to value (LTV) | Up to 75% maximum |
| Loan term | 3 to 30 years |
| Loan amount | £250,000 up to £250m |
| Interest types | Serviced |
| Interest rates | From 4.9% |
| Decision | Immediate decision in principle (DiP/AiP) |
| Completion | 4-6 weeks |
| Availability | England, Scotland, Wales and Northern Ireland & Europe Individuals, Companies, SPVs No credit & adverse credit considered |
| Exit strategy | Sale or refinance |
Buy-to-let mortgage guide
If you're unsure what a buy-to-let mortgages is, how it can be used, how much you can borrow, or how to apply for a BTL mortgage, we've created an easy to understand guide.
Contents
Understanding Buy-to-Let Mortgages
By investing in a buy-to-let mortgage, property investors can open up new opportunities to fund their rental investments. They offer a unique way of funding rental properties, with their own set of rules and benefits.
The Structure of Buy-to-Let Mortgages
If you've ever played Jenga, think about how careful you need to be when removing blocks from the tower - that's similar to structuring your buy-to-let mortgage. It needs balance and strategy. Most often, these mortgages are interest-only payments; this means throughout the term, you're only required to pay off the interest on what you borrowed.
This may sound like an easy ride compared to traditional repayment methods but hold onto your hats because there's more. At the end of your term comes 'the big one', repaying all capital debt in full.
But don't worry, savvy investors usually plan ahead by selling up or remortgaging.
How Buy-To-Let Differs from Residential Mortgages
In comparison with residential mortgages, buy-to-lets come across as being slightly high maintenance.
To start with they demand higher deposits (usually 25% minimum), making it less accessible for everyone who just got excited reading "interest-only". Then there is also an added cost called stamp duty surcharge.
Not only do they charge higher interest rates but lenders also take into account potential rental income before approving applications. This is to make sure you can afford repayments if the property sits empty for a while.
Buy-to-let mortgages aren't all bad news, they can offer great returns in the form of rental income over time. When it comes to cashing out or refinancing at the conclusion of your agreement, there may be potential for additional profits. Before you decide whether a mortgage is right for you weigh up the pros and cons. For example, BTL investments offer possible capital uplift and rental income but come with drawbacks such as the risk of rent arrears and tax implications.
Key Takeaway:
Compared to residential mortgages, they need higher deposits and lenders consider potential rental income before approval. But don't worry - with careful planning and possible remortgaging or selling up strategies, these can offer profitable returns over the longer term.
Role of Deposit Size, Interest Rate, and Loan Term
Your deposit size is like the first step on your property ladder. The more substantial it is, the less risky you appear to lenders. Typically in UK's housing market, larger deposits give way to lower interest rates.
The interest rate isn’t just some arbitrary number either, it’s shaped by various factors such as Bank of England base rate and even global economic trends.
As time passes, the length of your loan term can influence not only how much you pay each month but also the overall cost due to interest over that period. A longer-term may reduce monthly payments but increases total cost due to accumulated interest over time.
Influence of Loan-to-Value Ratio and Credit History
The LTV ratio is a crucial factor in calculating the rate of interest applicable. This ratio measures the relationship between the amount borrowed and property value. Research why the LTV ratio is so important.
Credit history often makes or breaks deals when negotiating terms with lenders. Understand why a good credit history is so crucial.
Keep in mind, each lender has its own way of determining rates and fees. It's not as simple as comparing apples to oranges. Having a grasp of the fundamentals will empower you to navigate the buy-to-let mortgage landscape.
Eligibility Criteria for a Buy-to-Let Mortgage
The world of buy-to-let mortgages can seem full of hidden pitfalls and confusing jargon. Here's a quick overview of the most common aspects.
Age and Income Requirements
It might sound ageist, but most lenders have an age limit for borrowers applying for buy-to-let mortgages. Generally, you must be a minimum of 21 and no more than 75 or 80 when the mortgage term is up. If you're under or over these ages, finding a lender may be trickier.
Besides age restrictions, income is another crucial factor considered by lenders. Generally speaking, they prefer applicants who earn £25k per annum or more. It acts as proof that you've got enough money coming in regularly to cover the mortgage payments if needed – essentially serving as your financial safety net if you have issues with low tenancy or tenants unable to pay their rent.
Good Borrowing History
Creditworthiness plays a starring role in any borrowing scenario - its crucially important. Having good credit shows potential lenders that lending money to you is within their risk tolerance. The cleaner your history with loans and credits cards, the more likely you are to secure a buy-to-let mortgage.
If your credit history is less than stellar, don't panic just yet. Some lenders might still consider your application but expect higher interest rates or larger deposit requirements. So, it's in your best interest (pun intended) to keep that borrowing record as squeaky clean as possible.
Property Considerations
Finally, don't forget that the type of property plays a big role. Different properties suit different mortgages - and more importantly, they attract different rates. Most lenders tend to favour traditional build houses and leasehold flats over others. That's not to say you can't get a BTL mortgage on a non-traditional build, for example a house that's of concrete construction - you can - its just not as easy to source a lender.
Key Takeaway:
Lenders typically consider age and income - you'll usually need to be 21-80 years old and earn at least £25k per year. Your credit history plays a big part too. And let's not forget about property type: traditional houses or flats often get the best rates.
Finding the Best Buy-To-Let Mortgage Deals
When looking for a great buy-to-let mortgage deal, it pays to compare offers from various lenders in order to find the best fit. By comparing deals from different lenders, you can find rates that fit your financial plan.
Leveraging a mortgage broker's network
A common mistake made by many first-time landlords is sticking to their current bank for a mortgage without reviewing what other lenders can offer. Loyalty doesn't always pay off when it comes to finance. Don't limit yourself – instead cast your net wide and explore all available options.
Different lenders have varying criteria and terms for their mortgages - so while one may not give favourable conditions based on your circumstances, another might just be perfect.
Mortgage brokers play an important role here too. They usually have established relationships with multiple lending partners and could help negotiate attractive deals that aren’t typically advertised to the public directly.
Your broker will understand both sides of the coin - they know what makes you tick as a borrower but also appreciate lender’s requirements inside-out. This insight can prove invaluable when securing a favourable rate or term adjustment that fits within your budget constraints. So don't hesitate to tap into this resource.
Tailoring Your Application
To get competitive rates it’s vital to present yourself as low risk borrower in eyes of potential lenders.
Ensuring credit score healthiness should be at top priority list. Experian can be a great place to start reviewing your credit history and score.
Moreover, preparing comprehensive documents showcasing regular income sources and ability to cover mortgage payments even during vacant periods will make your application more appealing.
After all, every lender wants assurance they'll get their money back.
Key Takeaway:
Don't settle for the first buy-to-let mortgage deal you see; look around to find rates that suit your financial plan. Make sure your application is attractive by presenting yourself as a low-risk borrower with good credit health and solid proof of regular income.
Key Considerations for Buy-to-Let Investors
When diving into the buy-to-let market, it's crucial to have a solid grasp of the landscape. Gaining a comprehensive understanding of the situation is essential to make informed choices and optimise your chances for success.
Tax Implications and Rental Income
Tax - well, whatever the 90's HMRC advert said believe me, it is taxing. The first hurdle in your path towards a healthy return on your buy to let property could be thwarted by tax implications.
As an investor, if your rental is profitable, it will mean that it is highly likely to be subject to taxes. There are a few important types of tax that you need to be aware of depending whether the property is held in a special purpose vehicle (SPV), or if you personally own it.
The most common taxes are these:
Income Tax or Corporation Tax
For the private landlord, whether they've personally purchased the property or have it sitting within a company, income tax or corporation tax may be applicable.
Both are forms of tax on profits, but we'll deal with each separately as apart from being a tax on profits - they're quite different.
If you rent out a property in the UK, you may be liable to pay income tax on the rental income you receive. Here are some key points to consider:
Taxable Income: Rental income is generally considered taxable, and you need to report it to HM Revenue & Customs (HMRC).
Allowable Expenses: You can deduct certain allowable expenses from your rental income before calculating the tax. Allowable expenses may include some mortgage interest, property maintenance costs, letting agent fees, and other relevant expenses. It's essential to keep records of all your expenses.
Tax Rates: The amount of income tax you pay on your rental income depends on your total taxable income, including earnings from employment, pensions, and other sources. The tax rates for rental income are the same as for other types of income.
- Basic Rate: 20%
- Higher Rate: 40%
- Additional Rate: 45%
Personal Allowance: You may also benefit from the personal allowance, which is the amount of income you can earn before you start paying income tax. The personal allowance may vary, and you should check the current threshold.
Tax Reporting: You will need to report your rental income and expenses on a self-assessment tax return. If you earn less than a certain threshold and meet certain criteria, you may not need to file a self-assessment return, but it's essential to confirm your obligations with HMRC.
Non-UK Residents: If you are a non-UK resident, you may still be liable for UK tax on your rental income. The rules regarding non-resident landlords are complex, and it's advisable to seek professional advice.
It's important to stay informed about the latest tax regulations, as they can change, and individual circumstances may vary. Consider consulting with a tax advisor or accountant to ensure that you comply with all relevant tax obligations and to get personalised advice based on your situation.
Corporations such as limited companies in the United Kingdom are subject to Corporation Tax on their profits, including profits generated from rental income. Here are some key points to consider:
Corporation Tax Rates: As of April 1st 2023, there are two rates of Corporation Tax in the UK. There is the Small Profits Rate of 19% on profits under £50,000 and there is the Main Rate at 25% on taxable profits over £250,000. In between those rates is a sliding scale of marginal relief from the small rate up to the main rate. However, it's important to note that tax rates can change, and you should check the latest rates with HM Revenue & Customs (HMRC) or a tax professional.
Taxable Profits: The profits from renting out a property are considered taxable profits for the purposes of Corporation Tax. This includes rental income minus allowable expenses.
Allowable Expenses: Similar to individual landlords, corporations can deduct allowable expenses from their rental income when calculating taxable profits. The biggest difference currently though is that allowable expenses typically include all mortgage interest, property maintenance costs, letting agent fees, and other relevant expenses.
Tax Reporting: Corporations are required to file a Corporation Tax return with HMRC. The return includes details of the company's income, gains, and allowable deductions. The deadline for filing the Corporation Tax return is usually within 12 months of the end of the accounting period.
Capital Allowances: Corporations may also be eligible for capital allowances on certain items, such as furniture and equipment used in the rental property. Capital allowances allow you to deduct the cost of these items from your profits before calculating Corporation Tax.
Non-UK Resident Companies: Non-UK resident companies may be subject to different rules, and there could be additional considerations for taxation.
Stamp Duty Land Tax
Besides tax obligations on rental income, another factor to consider is Stamp Duty Land Tax (SDLT). When buying a second property or more in England or Northern Ireland worth over £40k, there will be additional SDLT charges applied.
When you buy a property investment regardless of whether its being bought as a company, private individual, or you're transferring it from private ownership to a company, it is likely subject to SDLT at a 3% surcharge. Whilst there are some exemptions such as those buying as a charity, through right to buy, or even foreign nationals working for the Crown, for most that'll mean there's an additional charge on top of the prevailing rate.
You should also be aware that if you're purchasing as a company then there is a 15% higher rate charge, although currently you can apply for relief from the 15% higher rate charge if the property is used in a property rental business or being bought by a property developer or trader. Though be warned, this 15% tax relief for corporate bodies should be reviewed before you purchase your next rental property as it is subject to change.
How much time do you have to pay HMRC? 2 Weeks. You'll need to complete a SDLT return to HMRC and pay the tax within 14 days of sale completion.
Capital Gains Tax
Capital gains tax (CGT) in the UK is a tax on the profit (ie. the capital gain) made when you sell or dispose of an asset that has increased in value. Common assets subject to CGT include property (excluding your main residence), certain investments, and personal possessions valued at £6,000 or more. So, this tax directly impacts property investors when they're selling an investment property.
When it comes to property capital gains tax, the charge is based on the profit rather than the selling price. To calculate your gain, subtract the initial property purchase cost from the sale price. It's crucial to recognise that there are several strategies to reduce or potentially eliminate your capital gains tax liability.
Key points about capital gains tax in the UK:
Exemptions for Main Residence: Generally, there is no capital gains tax on the sale of your main residence. However, second homes, buy-to-let properties, or other real estate may be subject to CGT.
Annual Exempt Amount: Everyone is entitled to an annual exempt amount, up to which gains are not subject to tax. This amount may vary, so it's important to check the current regulations.
Rates: The rate of capital gains tax can vary depending on your income and the type of asset. As of my last update, basic-rate taxpayers pay 10%, and higher-rate taxpayers pay 20% on most gains. Residential property gains can have different rates.
Reporting and Payment: In most cases, you need to report and pay capital gains tax through the self-assessment system. There are deadlines for reporting and paying the tax.
Its a steep learning curve if you've not dealt with the different taxes before but don't let these taxes put you off. With careful planning and some good advice from professionals, managing these taxes can become straightforward.
Key Takeaway:
Navigating the intricate web of taxes associated with rental income in the United Kingdom is a critical aspect of property investment. The two primary taxes involved are Income Tax and Corporation Tax, each with its nuances and considerations. For individual landlords, Income Tax is levied on rental income, and meticulous reporting to HM Revenue & Customs (HMRC) is essential. Deducting allowable expenses, ranging from mortgage interest to maintenance costs, helps calculate taxable income and reduce liability. Tax rates vary based on overall income, with a personal allowance potentially offering some relief. Compliance with self-assessment tax returns is mandatory, and non-UK residents must navigate specific rules.
Buy-to-let Mortgage Loan Terms
The loan term might seem like just another piece of jargon when starting out in buy-to-let investing but understanding its impact on your finances could save tens of thousands down the line.
A shorter loan term may lead to higher monthly payments but lower total interest paid across the life span of the mortgage. On contrast, longer terms typically offer smaller monthly payments at potentially higher overall cost due to accrued interest. Deciding between them requires weighing up affordability now against total payout later.
Mortgage Rates & Deals: The Balancing Act
When selecting a buy-to-let mortgage, take the time to compare offers in order to identify a competitive rate that meets your needs. Shopping around can help unearth competitive rates that balance monthly payments and total cost.
But remember, the cheapest isn’t always best. Other factors such as customer service and speed of processing may also influence your choice.
Rental Demand & Property Location
Last but certainly not least is considering rental demand in your chosen area. No landlord wants an empty property, so research local rental markets thoroughly before committing to a purchase.
Always remember to consider the type of tenant you're dealing with.
Benefits of Investing in Buy-to-Let Mortgages
If you're thinking about dipping your toes into the property market, buy-to-let mortgages might be a great option for you. But why exactly should you consider this type of investment? Let's delve deeper.
The Magic of Passive Income
Buy-to-let properties can give a steady flow of passive income. You become the landlord, and rent payments from tenants can help cover mortgage repayments and even result in some extra cash each month.
The average UK rental yield is around 5% to 6%. Thus, with the right handling, it could be a highly profitable endeavour.
Potential Capital Growth In Bricks And Mortar
Apart from generating monthly revenue through rent, there's also potential capital growth. In simpler terms - your property could increase in value over time.
According to data from the ONS, the average house prices in the UK increased from £167,716 in January 2013 to £290,000 by the close of January 2023, reflecting an incredible gain of 73 percent. Capital increases have been impressive 8% annually over the past decade.
Nationwide’s House Price Index suggests long-term investment in buy-to-let properties tends to offer significant returns due to consistent housing demand and limited supply.
FAQs in Relation to Buy-To-Let Mortgage
How much money do I need to get a buy-to-let mortgage?
You typically need around 25% of the property's value as a deposit for a buy-to-let mortgage - so that's £25,000 for every £100,000 you intend to borrow, but this varies between lenders.
What deposit do I need for a buy-to-let?
The usual minimum deposit required is about 25%, however, you might bag lower interest rates if you can stump up more.
How much equity is required for a buy-to-let mortgage?
In most cases, you'll require at least 25% equity in your existing property to secure a good deal on your new investment.
Is it easy to get a buy-to-let mortgage?
This depends. Your age, income and credit history play crucial roles. It could be easier with solid finances and strong rental demand in your chosen area.
Final thoughts
Becoming a Landlord can be profitable, but it also comes with many responsibilities - not least of all tax. If you're considering a buy-to-let mortgage then learning the differences to standard residential mortgages is important - don't assume you know the differences. Consider the costs, factoring in deposit size, interest rate and loan term to ensure you get the best deal possible.
Remember, your credit history matters too - make sure you keep it clean and if you can't then be proactive and explain why its anything less than perfect with your broker and any potential lenders.
And remember: tax implications can impact your investment returns significantly. Make wise choices with an eye on long-term gains.
A successful buy-to-let investor keeps all these factors in mind while hunting for the perfect property investment. It's time you started yours. Good luck!
