Buy to Let Mortgages, or BTL mortgages are loans specifically for landlords who wish to invest in property and in turn, rent it out. What follows is more information about how Buy to Lets work, who is eligible to get one and some of the potential issues involved.
Can I get a Buy to Let mortgage? You can get a BTL if you fit the following criteria:
- You wish to invest in a residential property like a house or flat, or even something larger such as an HMO or a Commercial
- You understand the risks involved with investment.
- You already own a property that can be used for security.
- Your credit score is acceptable to the mortgage lender.
- Your income is more than £25K, again depending on the mortgage lender.
- Lenders have age limits. Although there are no guarantees, if you take out a 25 year loan, lenders would expect you to still be around at the end.
How is a Buy to Let Mortgage Different?
Just like with a residential mortgage, there is the loan, fees and a maximum amount you can borrow, however with a Buy to Let Mortgage:
- The admin fees will be higher
- The interest rate on the loan will be higher
- The Loan to Value (LTV) will be higher, meaning you’ll have to place a larger deposit, somewhere around 25%.
- Most Buy to Let mortgages are Interest Only, meaning that at the end of the mortgage term, you’ll still owe the amount you borrowed, some Capital and Interest Buy to Let mortgages are available.
- Buy to Let mortgages are generally not regulated by the FCA, however there are exceptions, especially when letting the property to family.
How much can I borrow for my Buy to Let Mortgage?
Put simply, the monthly rent payment you receive from your tenant needs to be higher than your Buy to Let monthly loan payment. This is called the coverage and your lender is likely to want to see at least 125%. Looking on sites like Rightmove and On the Market will give you an idea of what rental prices similar properties in your area are fetching.
We are independent mortgage advisers who have access to over 170 specialist and mainstream lenders to ensure you get the absolute best loan for your circumstances
Where can I get a Buy to Let Mortgage?
This is where we come in! We are independent mortgage advisers who have access to over 170 specialist and mainstream lenders to ensure you get the absolute best loan for your circumstances. Our experienced advisers will take time to understand your needs and circumstances and recommend a mortgage that fits with your budget and long-term plans. The MR Mortgages team will take away all the headache of the mortgage process by dealing with the paperwork, lender, solicitor, insurance providers and more.
What if?
What if your tenants leave or your property needs a major repair and you don’t have any income? It’s a good idea to bank some of the rental income in case of such events. Don’t rely on selling the property to pay off the mortgage, prices go down as well as up. If you do sell your property, you could be liable for Capital Gains Tax. There is a Capital Gains Tax calculator at www.tax.service.gov.uk
Landlords Insurance/ Rent guarantee
Your buy to let property is a significant asset, so it is important to make sure your investment is protected by having adequate insurance in place.
Most landlord Insurance will also allow you to have additional features such as rent guarantee and legal expense cover, which can prove invaluable if your tenants fail to keep up with their rent, or in the event you need to repossess your property.