Buy To Let
Mortgages
If you’re an experienced landlord purchasing a new property, looking to remortgage an existing one or have just made the decision to become a landlord, choosing the right Buy to Let (BTL) mortgage can be a daunting prospect.
Contact UsIt’s advisable to seek professional advice when venturing into the Buy-to-Let market. Consulting with mortgage advisors, tax professionals, and property management experts can provide valuable insights and help you make informed decisions.
This is where our team of experts at Vincent Burch Mortgage Services can help. With over 200 years of combined knowledge and experience as a specialist BTL mortgage broker, we know how to navigate the details, smooth the process and find the right finance deal for your investment. By choosing us as your independent mortgage broker we can access the most suitable BTL mortgage rates on the market, from a wide range of lenders, at the touch of a button.
What is a Buy-to-Let mortgage?
A Buy-to-Let mortgage is a mortgage you would use to buy a property before renting it out, and is distinct from a standard residential mortgage as it is tailored to the specific needs of property investors and landlords. Your mortgage repayments should be covered by your rental income, but there are additional expenses and lending criteria to consider before applying.
How does a Buy-to-Let mortgage work?
A Buy to Let mortgage is for someone who wants to purchase a residential property to let out and usually earn the rental income paid by the tenants. Instead of buying the whole property with their own money, a buy to let mortgage allows the purchaser to only commit a proportion of the money towards the purchase. For example, if you wanted to buy a property to rent for £200k, instead of committing £200k to a single purchase transaction, the Buy to Let mortgage could see that £200k be split into 4 lots of 25% deposits and allow the purchaser to buy 4 properties instead of 1 property. The vast majority of BTL mortgages are interest only, so you only pay the interest on the loan with your monthly payments, making them less than a typical residential mortgage. However, at the end of the term, you will need to pay back the loan in full, either by selling the house or remortgaging.
Pay Your Deposit
Interest Only Payments
Full amount due
What are the types of Buy-to-Let mortgages?
There are two types of BTL mortgages, interest only and repayment. On an interest only mortgage, you just pay the interest, keeping your monthly payments lower, but you will have to pay the remainder of the mortgage at the end which most people do buy selling the property. With a repayment mortgage, you pay both the interest and capital each month, making the monthly payments higher than an interest only, but at the end of the mortgage term you will own the property.
After you have decided on your mortgage type, you then need to decide whether you would like a fixed rate or variable rate mortgage, which we can help advise you on.
How much can you borrow for your Buy-to-Let mortgage?
The amount that you will be eligible to borrow for a Buy to Let mortgage will be determined by a few factors which differ to typical residential mortgages. The main determining factor will how much rental income the property is able to generate. Most lenders will require that the rental income is able to cover a large percentage of the mortgage payment. Typically, the lenders will require that the rental income is at least 125% of the mortgage payment, or even up to 145% based on the individual lenders criteria.
The lenders will then also assess your personal financial situation, including whether you earn your own income, any existing debts, your credit history. They may also consider the property’s value and your deposit amount. Typically lenders will offer loan-to-value (LTV) ratios up to 75% for Buy-to-Let mortgages meaning you will need a deposit of at least 25% of the property’s purchase price. Some lenders offer higher LTV ratios, but this often comes with higher interest rates.
The maximum amount you can borrow for a Buy-to-Let mortgage depends on these factors and the specific criteria of the lender you choose. It’s advisable to speak to a mortgage broker, like our expert advisors, who can provide personalised advice based on your needs.
Consumer Buy-to-Let mortgages
Standard buy-to-let mortgages are typically for landlords who buy a property with the specific purpose of renting it out. However, ‘accidental landlords’ can happen. Not everyone who becomes a landlord started with the intention of doing so. Consumer Buy-to-Let mortgages are designed for this specific purpose.
These mortgages are regulated in the same way as a residential mortgage, but are tailored towards non-professional and ‘accidental’ landlords. The borrower can enjoy more protection than with your average business Buy-to-Let mortgage.
Previously, the UK Buy-to-Let market was unregulated by the Financial Conduct Authority. However, in 2016, the Mortgage Credit Directive was implemented to regulate the property market alongside tougher application and affordability requirements.
Their legislation aimed to distinguish “accidental landlords” in need of consumer protection from “professional landlords” who rent out property with the purpose of managing a Buy-to-Let business. A borrower can now declare if they are acting as a professional rather than a consumer.
If you have inherited property from a family member or let out their home and moved out, you may qualify for consumer Buy-to-Let. Please speak to one of our advisers to ensure which mortgage products might be available when considering mortgaging a consumer Buy-to-Let property.
Who is eligible for a Buy-to-Let mortgage?
The eligibility criteria for a Buy-to-Let mortgage will vary between lenders, but there are common requirements that potential borrowers typically need to meet. Each lender sets its own eligibility criteria, so its best to contact a mortgage advisor like us as we can help you understand the options and find a lender which best suits your individual circumstances.
Your income
You will need to demonstrate that you have sufficient income to cover you own expenses as well the mortgage payments on the BTL property. Lenders will require proof of income such as pay slips or tax returns.
Your credit rating & borrowing history
Lenders will assess your credit history and while some may accept applicants with a poorer score, a good credit score can improve your chances of approval and access to better interest rates.
Your deposit
You’ll generally need a larger deposit for a BTL property compared to a residential. Most lenders will require a minimum deposit of at least 25% of the property’s purchase price.
What are the interest rates on Buy-to-Let mortgages?
Interest rates on Buy-to-Let mortgages can vary on depending on several factors including the lender, the type of mortgage product, the loan-to-value ratio and the market conditions. Below are typical rates that you can expect depending on the aforementioned factors.
- Fixed-rate mortgages can range from 2-5%
- Tracker mortgages are linked to the Bank of England base rate or the lenders standard variable rate, they can range between 1-4% or higher depending on market conditions.
- Discounted variable-rate mortgages offer an initial discount off the lender’s standard variable rate (SVR) for a set period, these can vary widely but generally can be 2-5%
- Interest-only mortgages have slightly higher interests due to the increased risk for lenders, these can range between 2.5-6% and higher.
These will vary based on your individual circumstances and are only guides. Please get in touch if you would like to find out interests rates available to you.
What you should consider before getting a Buy-to-Let mortgage
- Financial Stability – Are your own personal finances stable? If the property is vacant for long periods of time or interests’ rates rise can you afford the mortgage payments?
- Property Selection – Choose the right property for your investment objectives considering factors such as location, property type, condition and potential income. Look for properties that appeal to your target tenant demographic and have the potential to increase in value overtime for when you need to pay off your remaining loan.
- Expenses – Calculate all the potential expenses associated with owning and managing the property including mortgage payments, taxes, insurance, maintenance costs, and property management fees. Ensure that you have enough cash flow to cover these expenses and still generate a profit.
- Tax implications – Make sure you understand the tax implications of owning a rental property including income tax on rental income, capital gains tax on property sales and potential tax regulations affecting landlords.
We’ll reveal the best Buy to Let mortgage deal!
As an independent Buy to Let specialist mortgage broker we can offer you a great choice of mortgages from a wide range of BTL mortgage lenders, such as Birmingham Midshires, Paragon and The Mortgage Works. This means we can quickly and easily compare the most competitive rates across the whole market. And as a fee-free mortgage broker there’ll be no hidden costs when it comes to getting you the best deal.
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Frequently Asked Questions
How many Buy-to-Let mortgages can I have?
The total number of Buy-to-Let mortgages you can have at one time depends on the individual lender’s policies and your own financial situation. Some lenders may limit the number to a total of three or four, while other lenders specialise in portfolio landlords and in this case may allow ten or more.
In the same way as other mortgage products, lenders will consider factors such as your income, credit history, existing portfolio performance, and overall risk profile. Each lender has their own criteria, so it’s essential to work with or consult a mortgage advisor for specific guidance tailored to your circumstances.
How can I get a Buy-to-Let mortgage?
Getting a Buy to Let mortgage involves several steps: research and planning, checking eligibility, choosing a lender, completing the application process, and undergoing approval and completion.
You will first need to determine your budget and potential rental income, and decide on the specific property type and its location. Then you’ll need to ensure you meet lenders’ criteria, including analysing your credit score, deposit size, and specific income requirements. The next step is to compare different lenders and their Buy-toLet mortgage products.
It will be beneficial at the start of your journey to consult a mortgage broker for specialised advice and guidance, as they will be able to support you and help you understand each stage of the application process. The application process will require you to provide necessary documentation and undergo a property valuation and affordability assessment.
Working with a mortgage broker or advisor can help increase your chances of success, as they can help you understand the specific requirements and options available to you.
Are Buy-to-Let mortgages regulated?
The large majority of Buy-to-Let mortgages are not regulated by the Financial Conduct Authority (FCA) because they are considered to be a business transaction, and are therefore not eligible for the FCA’s consumer regulations.
These regulations aim to protect the general public. However, a Consumer Buy to Let mortgage is regulated, and any application which falls into the category of a Consumer Buy to Let would be covered by FCA regulation. The transaction is treated with similar consumer protections to a traditional residential mortgage.
