If you’re in the market for a buy to let mortgage, you’ll want to make sure you get the best deal possible. That’s where expert advice can help, guiding you through the process and making sure you find the right mortgage for your needs.
Plus, our brokers have exclusive deals with some of the biggest lenders in the country, so you can be sure of getting a good rate.
What is a buy to let mortgage and who is it for?
A buy to let mortgage is a type of mortgage designed for people who want to buy a property to let out over the long term. It’s a little different from a regular mortgage, as the lender is taking on more of a risk by lending money to someone who isn’t going to live in the property.
The term ‘buy to let’ applies to properties, which can be houses or flats, which are let to long term tenants using an AST agreement. The tenants will make this property their home and pay you rent each month. You will need to make the monthly mortgage repayments even when you may not have received any rent.
A buy to let mortgage is typically for people who already own their own home and are looking to invest in property. But it’s also possible to get a buy to let mortgage if you’re a first-time buyer, although there’s slightly less choice.
If you only have a residential mortgage on a property and rent it out, you will be in violation of your mortgage agreement. To rent out your property without breaching your mortgage agreement, you will need to apply for a buy to let remortgage or request your lender’s permission first, this is known as a ‘consent to let‘.
The benefits of buy to let
There are a number of benefits to buy to let mortgages, including:-
- The potential to make a profit from rental income
- The possibility of your property increasing in value over time
- The ability to offset property expenses against income
- The option to release equity from your property
Most people acknowledge that owning property is financially rewarding.
There is also the effect of ‘gearing’ which accelerates the return you can achieve because you have used a mortgage to finance the purchase.
How does the process work and what are the steps involved?
If you’re looking to buy a property to let out, a buy to let mortgage can be a great option. But how do you apply for one? Read on for all the information you need.
The first step is to speak to an independent mortgage broker, who will help you find the right buy to let mortgage for your needs. They’ll assess your finances and make sure you can afford the monthly repayments and the initial set up costs. These will include the deposit, stamp duty, mortgage fees and legal fees.
Once you’ve found a suitable buy to let mortgage, you’ll need to put down a deposit of usually 25%. You’ll then need to go through the mortgage application process, which can take a few weeks.
Your adviser will monitor how your application is progressing and will give you regular updates. Occasionally the lender may ask for additional information, such as proof of earnings or bank statements.
When the lender has received a satisfactory valuation of the property and concluded its underwriting of your application they will issue a mortgage offer. This is a formal document, which will outline the terms and conditions of your buy to let mortgage.
You’ll need to sign and return the mortgage offer, and then the lender will prepare for the money to be transferred to your solicitor.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
The different types of buy to let mortgages available
There are a number of different types of buy to let mortgages available, so it’s important to find the one that best suits your needs.
Fixed rate
With a fixed rate mortgage, the interest rate is set for a specific period of time, usually 2-5 years. This can give you peace of mind, as you’ll know exactly how much your monthly repayments will be during this time.
Tracker rate
A tracker rate tracks the Bank of England base rate plus a margin (eg base rate plus 0.50%). This means that if the base rate changes, your interest rate will change too.
Discounted rate
Discounted rate buy to let mortgages offer a discounted interest rate for a specific period of time, usually 1-5 years. After this period, the mortgage will revert to the lender’s standard variable rate.
Standard variable rate
With a standard variable rate (SVR), your interest rate will go up or down in line with the lender’s standard variable rate. This can make budgeting difficult, as you can’t predict what your monthly repayments will be in the future.
You will also need to consider the repayment method.
There are two main types of repayment methods available for buy to let mortgages:-
Interest only: With an interest only mortgage, you only pay the interest each month. This means your monthly repayments will be lower, but you’ll need to make arrangements to repay the full amount borrowed at the end of the term. The majority of landlords will choose to set their loan up on an interest only basis.
Capital and interest: With a capital and interest (repayment) mortgage, you pay back both the interest and some of the capital each month. This means your monthly repayments will be higher, but you’ll have repaid the full amount borrowed at the end of the mortgage term.
Not on the High Street!
The high street lenders can’t help every mortgage customer and they prefer the simple, low-risk ones.
If your situation is a bit different or needs a more personalised solution then our brokers can help.
Expert advice, for all situations.
Bridging Loans
The most flexible of secured loans and often misunderstood. Bridge loans can be used in so many different ways and can be arranged super fast.
Large Loans
High net worth mortgage brokers understand complex large loans and unique situations and can source bespoke deals from the right lenders.
Let to Buy
Let to buy combines a buy to let remortgage with a residential mortgage. Allowing you to move house while keeping your current home.
Things you need to consider before taking out a buy to let mortgage
Before taking out a BTL mortgage, there are a few things you need to consider
Do you have a good credit history?
It’s important to have a good credit history when applying for any mortgage, as this will make it more likely that your application will be successful. Lenders will carry out a credit check as part of the application process. If you are unsure then it might be a good idea to request a copy of your credit report. Read our Credit Report Guide to find out more.
Do you have sufficient deposit?
You’ll need to have a deposit in order to apply for a buy to let mortgage. The size of the deposit will depend on the lender, but it’s typically around 25%.
Are you aware of the regulations?
There are a number of regulations that buy to let landlords need to be aware of, such as the Smoke and Carbon Monoxide Alarm (England) Regulations 2015 and the Energy Performance of Buildings (England and Wales) Regulations 2012.
It’s important to make sure you’re up to date with all the latest regulations before letting the property. Most letting agents will either be able to do this on your behalf, or provide advice on what is needed.
Are you a portfolio landlord?
If you own four or more mortgaged properties that are let out then you will be considered a portfolio landlord. This means that lenders will be assessing you and your portfolio when you apply for a new mortgage.
Would a portfolio mortgage be useful?
This is only suitable for investors with at least four investment properties. A portfolio mortgage is a special type of buy to let mortgage for portfolio landlords. Instead of having an individual mortgage for each property, you would have a portfolio lending facility that finances multiple properties.
What are the fees?
There are a number of fees associated with buy to let mortgages, such as arrangement fees, valuation fees and legal fees. It’s important to check what fees are payable before you apply for a mortgage, so that you can budget accordingly.
Are you an accidental landlord?
If you’ve inherited a property and now want to rent it out, you will probably need a consumer buy to let mortgage. These ‘accidental landlord‘ schemes are regulated by the FCA, providing additional financial protection for you.
Switching to a buy to let mortgage
Renting out your own home is an option that many people turn to. It allows an extra income to be generated and by keeping the property you still benefit from future rises in property prices.
But changing how you use a property also means updating your mortgage. We look at the related mortgage options, eligibility criteria and how to get the best deal by using a broker.
How to find the best deal on a buy to let mortgage
It’s important to shop around when you’re looking for a buy to let mortgage, as the deals on offer can vary significantly from lender to lender. It’s a good idea to compare a range of different mortgages before deciding which one is right for you.
You can use a buy to let mortgage calculator to compare the interest rates and monthly repayments of different deals.
It’s always worth speaking to an experienced mortgage broker, who will be able to advise you on the best buy to let mortgage deals available. They will have access to ‘broker only’ lenders and can also help you to apply.
By taking all of these factors into account, you’ll be able to find the best buy to let mortgage deal for your needs.
FAQ
Frequently Asked Questions
How many BTL mortgages can you have?
There’s no fixed limit for the number of mortgages that a person can have.
Can a first time buyer have a buy to let?
Yes, but there are not as many lenders to choose from .
Is your service whole of market?
Yes. We work with qualified brokers who have access to the whole market.
How old do you need to be?
Most lenders accept borrowers who are 18-85.
