Buy To Let
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BTL Mortgages – buying a house to let
You might be planning to buy a property specifically to rent out to tenants, or letting a property you already own. Either way you will need a special Buy to Let mortgage, which involves a few decisions. Mortgage Marketplace will help you find a Buy to Let mortgage that works for you.
How does a Buy to Let mortgage work?
You need a Buy to Let mortgage to purchase residential property to rent out to tenants. Buy to Let mortgages have a few differences from standard residential mortgages. You will usually need a larger deposit, for example, and mortgage rates are generally higher.
You will still need to make monthly repayments, but your tenants’ rent should cover this cost.
Who could get a Buy to Let mortgage?
To get a Buy to Let mortgage you will need to meet the provider’s criteria. Each lender has slightly different requirements. Often they will want evidence that you earn a certain income alongside the rent. The purpose of this is to ensure that if you don’t have a tenant for a while you can still meet the payments on your mortgage.
Many lenders set an upper age limit – you usually need to be under 80 at the end of the mortgage term.
How much could I borrow on a Buy to Let mortgage?
With a standard mortgage the amount you can borrow is based on your income. For a Buy to Let mortgage meanwhile the lender instead looks at how much rent the property will bring in.
Lenders often require that the rent is equivalent to 125% of the monthly mortgage payment. Other lenders may want this figure to reach 145%. Our job is to research the most favourable rental formula for you when comparing rates and providers.
Be sure you research the rental market in your chosen area before making an offer on a Buy to Let property. Check the level of rental demand and typical prices to be confident you can make a good profit.
Interest only or Repayment?
It’s fairly common for landlords to choose an interest-only mortgage, where the payments only cover the mortgage interest each month. Your monthly repayments are much lower this way so you make a bigger profit.
The disadvantage is that you’re not decreasing the overall mortgage debt – when the mortgage term ends you will need to pay back the amount you originally borrowed. You could sell the property to repay the debt, but this is risky – property values can go down as well as up.
The alternative is to take out a capital repayment mortgage, where you pay more each month but you gradually repay the loan. You can also choose between variable rate mortgages and fixed rate deals.
What are the main risks with Buy to Let?
The biggest risk of Buy to Let is that you make less profit than you hoped – especially if your property is empty for some time. Whenever there are gaps between tenants you will need to pay the mortgage even though there’s no rent coming in. Aim to keep your tenants long term if you can.
If you decide to appoint a letting agent to manage the property for you, cost it out carefully against your rent and mortgage calculations. There can be a number of fees and charges that eat into your profits. Set your rent carefully too – if it’s expensive you could find it difficult to let the property.
There are a few rental property costs to plans for, including maintenance, annual gas safety checks, replacing damaged furnishings etc. You will also need a form of home insurance called landlord’s insurance.
Buy to Let mortgages and tax
You will need to pay stamp duty if you’re buying a property to let, and if you already own a home there’s an additional 3% to pay. The government’s stamp duty calculator will show you how much this will cost.
If your profits exceed the HMRC Personal Allowance you will need to complete an annual income tax Self-Assessment. Some landlords appoint an accountant to look after their books and taxes.
How could the Mortgage Marketplace help me Buy to Let?
Many Buy to Let mortgage deals are only available via Mortgage Brokers like us, so we can make it faster and easier to find a competitive deal. We only work with reputable lenders that are on the Financial Services Register.
We help many landlords buy properties to let and achieve their goals for rental income and mortgage repayment.
Frequently Asked Questions
Call us today on 0800 170 7021 to discuss your borrowing potential and eligiability.
Typically, the mortgage process will take 2-6 weeks to reach approval.
A mortgage offer is usually valid for 6 months.
Please be aware, the process is currently taking longer due to Covid-19. Please see question ‘How has Covid-19 affected the mortgage market?’.
Whilst you are not required to take out a life cover, our job is to ensure your mortgage is affordable, no matter what. It may not be nice to talk about, but if something were to happen to you, you want to know your family and investment are safe.
We will advise on all the options available and provide a no obligation quote from our partner providers.