More than just bricks and mortar
Buy to Let (BTL) mortgages provide individuals with the prospect of a long term investment by capitalizing on rental income as a revenue source, and from the property’s capital growth. The drawing power of a BTL mortgage is generating income from rent to cover mortgage repayments, while the value of your property hopefully continues to grow. A third party rental income can cover the insurance charge, general repairs and the general preservation of the property. Not only can a BTL property yield value, it can also serve you later on in life as a haven for retirement.
Whether you are looking for an additional source of income or to diversify your investment portfolio, it pays to speak to an excellent buy to let mortgage advisor. Large Mortgage Loans can talk you through which mortgage options are available, and we help you decide which one is right for you. Whether you are a property investor, developer or landlord, we can help you source the most suitable Buy to Let mortgage for your needs by connecting you to our extensive network of banks and private lenders.
What Is A Buy To Let Mortgage?
A Buy to Let mortgage is a mortgage for anyone that wants to invest in property. We look after many property investors, developers and landlords who want to buy a property for the purpose of renting it out to tenants. This is otherwise known as a landlord mortgage, and permits you to let your property to tenants, students or as a holiday home.
How Do Buy to Let Mortgages Work?
Buy to let mortgages are a similar to traditional mortgages, but with two key differences:-
- Mortgage terms are on an interest only basis (meaning that you will not have to pay off the capital)
- You will be required to pay back the full loan at the end of the mortgage term.
Who Are Buy to Let Mortgages For?
Buy to Let mortgages can be taken out by individuals or limited companies. Large Mortgage Loans works with two types of profiles, which, although they are set up differently, both seek to achieve a long term investment from a BTL property.
Limited Company Buy to Let Mortgages
Large Mortgage Loans has the capacity to secure corporate Buy to Let products for limited companies in pursuit of making a commercial return. In order to achieve this, the criteria and structure is relatively complex. We typically support out corporate Buy to Let applications for:
- Company portfolio
- Professional landlords
Company Buy to Let mortgages make up a relatively small percentage of the market, but numbers have been on the rise in the last few years. Interest rates on these deals tend to be significantly higher than those available to individual borrowers.
Buy to Let Mortgages for Individuals
The Buy to Let mortgage market is rapidly growing, largely due to the difficulties that first-time buyers face entering the property market. It is absolutely essential that you have a good credit record and you are not stretched financially in any other capacity e.g credit cards.
Large Mortgage Loans aims to guide you through the mortgage process, developing a long term relationship to ensure that you capitalize on your assets throughout your lifetime. From the pivotal moment when you exchange keys on your first property, to later on in life- you may need assistance with remortgage applications.
Points to Consider When Taking Out A Buy to Let Mortgage
There are three key points to consider before you take out a Buy to Let mortgage- the location, the state of the property, and the type of tenant you want to take on.
- Location, location, location.
Research the area you are buying your property in. It is worth getting a grasp on local rental property market projections and whether you are likely to have tenant demand in the future. Identifying the scope for demand will help to mitigate any chances of your property reducing in value or having periods with no tenant demand.
- Living Standards
While you may assume that a property can be rented out to a student would be low-maintenance, it is worth bearing in mind that tenants have high living standards, and the facilities such showers, washing machines and fridges are expected as standard.
- Which type of tenant you onboard
Some types of tenants are more desirable than others. Most lenders require that you have at least a six month AST (assured short hold tenancy) in place with your tenants. It may be more complicated if you choose to let to students, or DSS tenants. Aim for regular tenancy periods to provide you with some financial consistency.
Lastly, as a landlord you will need a contingency plan, so that should the property ever become vacant you have a financial cushion to rely on. Therefore it is worth ensuring that provisions are put in place should this occur.
What Are The Benefits Of A Buy to Let Mortgage?
- Historically, the potential for capital gain has served investors well. This means that the selling price of the asset exceeds the purchase price.
- Rental demand has seen an uptick over the course of the past two decades, and shows no sign of slowing down.
- Generating an income. The low monthly payments allow you to have a certain amount of financial flexibility before the capital on the property is due.
- Ongoing costs to maintain the property are upheld by the rental income, assuming that your property will continually be rented out.
What Deposit Do You Need When Taking Out a Buy to Let Mortgage?
The deposit required for the purchase of a Buy to Let property is often higher than that required for a residential mortgage. Typical deposits change from lender to lender, however in principle a deposit of 25% of the property’s value is expected as a minimum, and it can range as much as up to 40%. Large Mortgage Loans has access to a range of competitive deals, from fixed rate and variable rate options, and in some instances we can over up to 85-100% LTV (Loan to Value) depending on your overall circumstances.
How Much Can You Borrow For A Buy To Let Mortgage?
How much you can borrow is contingent on the rental income that you expect to receive. In principle, lenders typically require the expected rental income to be approximately 30% higher than your mortgage payment. Carry out some due diligence to find out how much you expect your rental income to be. Aim to look at more than one source. You could start off by talking to estate agents, who will have been privy to the fluctuations in the property market over an extended period of time. Don’t rely on a snapshot of one isolated moment in time. It will also be worthwhile finding out how much other similar properties rent for in the same area.
Typical Buy To Let Rates and Fees
Buy to let mortgages are available as fixed or as variable. Arrangement fees are typically between 1.5 and 2% of the mortgage loan. Large Mortgage Loans will help you to compare mortgage deals to find the right deal for you. We take a holistic approach and assess the overall cost of the loan, as a low interest rate can sometimes be outweighed by high fees.
Are You Eligible For A Buy To Let Mortgage?
Lenders generally feel more comfortable lending to applicants who already have a residential mortgage, and while it can be difficult to obtain for applicants who don’t own a residential home, it’s not impossible. Assessing an applicant’s affordability is nuanced, and can vary slightly from lender to lender. However, when lenders assess a borrowers eligibility they will take into account the following:
- A good credit rating
- You will usually need at least a 25% deposit, and a larger deposit will enable you to get a preferential rate.
- The age of the borrower (applicants must be between 25-70 years of age)
- You must be earning a minimum of £25,000
Having access to the right lenders is essential to ensure that you negotiate the best possible mortgage terms. Large Mortgage Loans are unparalleled at navigating a myriad of over 300 lenders and private banks to find the best solution for you.
Is A Buy To Let Property a Good Investment?
While many BTL investments turn out to be lucrative, other borrowers may experience a completely different outcome. This is why we highly recommend going the extra mile to carry out research to make sure that you are confident that you can expect a continual tenant supply, and secondly that your property will grow in value. When you are trying to identify an area which will have a higher demand for tenants, if you have the financial scope to, consider an area where owner occupation is less affordable. There are no golden rules to success, but the best way to start the process is by seeking the right mortgage advisor who can connect you to the right lenders.
Buy To Let And Tax
How much you will pay it subject to which tax band you fit into. Largemortgageloans.com can refer you to a trusted accountant who can guide you on how to be tax efficient.
Mortgage Interest Tax Relief
Landlords financing costs will be given as a basic rate tax reduction. Landlords will have to declare the income used to pay their mortgage on their tax return. The maximum amount of your interest payments you are able to deduct is 20% tax credit for the entire amount.
You will have to pay tax on the income you earn as a Buy to Let property. When you carry out your tax assessment form, there will be a levy charged in accordance with your current tax banding. This will start off at 20%. If you sit in the upper end of the earnings bracket, then you could be faced with a levy of up to 40 to 45% of your income.
Capital Gains Tax
When you sell a property which is not your primary home, you will have to pay capital gains tax if you make enough to make a profit and your gain is higher than the annual threshold of £12,000.
There are a few legitimate ways to reduce your bill. Costs such as stamp duty, solicitor and estate agent fees can be offset by by deducting these from any capital gain. Also include any losses made on a sale of a Buy to Let property in a previous tax year. When you complete a Self Assessment tax return for that tax year you must declare the sale of the property and this will be included when working out your tax status for the year.
How Many Buy To Let Mortgages Can I Get?
How many mortgages you can take out is contingent on whether your lender will permit you to do so. Large Mortgage Loans works with niche lenders who are open-minded about the number of Buy to Let mortgages borrowers take on, subject to the loans viability..
Large Buy To Let Mortgages
largemortageloans.com are adept at dealing with large mortgage loans from 500k, and have dealt with mortgages for up to £37 million. We can serve the unique interests of high net wealth individuals, and are well placed to deal with sophisticated financial profiles.
The Best Buy to Let Mortgage
There is a lot to consider when weighing up whether a Buy to Let venture is for you. Which is why we are on hand to provide an initial consultation to help guide you through the process.
Why Choose Large Mortgage Loans?
- LML negotiates the best possible mortgage terms. We are unparalleled in navigating a myriad of lenders and private banks.
- We are a member of the NACFB
- We provide creative solutions for sophisticated financial profiles.
- Clients have our undivided attention from inception to completion. We spend time with clients and listen carefully so that we can understand their requirements.
- The lines of communication are always open. We are on hand to assist clients in assisting individuals living in international time zones.
- Information is a key component of the Largemortgageloans.com philosophy. We update individuals regularly on the state of the UK property and mortgage markets. Our UK financial services professionals, based in London, set up to build a team of property finance advisers in 2003 to facilitate commercial borrowing requirements of high net worth individuals. Since then, we have been exposed to a range of scenarios, and as a result, we are adept at problem-solving.
- Our service offering is multi-faceted. Our experts are agile and have a breadth of expertise. We provide advice on mortgages, remortgages, raising traditional development funding and bridging loans to support commercial finance development.
- We approach mortgages from a long-term business perspective, thus attracting investors looking for a property portfolio.
- Discretion is of the utmost importance to us. We will not contact any third parties before seeking clients approval first.
- We work with multiple jurisdictions, thus enabling us to provide flexible solutions for clients’ living overseas.