At EBR Mortgages, we take the time to understand your overall Buy to Let strategy and offer solutions accordingly, helping you to acheive your property investment goals. Whether you are a first-time landlord, or a Buy to Let investor with an existing portfolio, our goal is to make the process simple and ensure profitability for your investments in the long run.
A Buy to Let mortgage is a loan that enables you to buy a property with the intention of renting it out to tenants, generating a profit. To be eligible for this type of mortgage, you cannot reside in the property. If you intend to make the property your permanent residence, you will need to secure a residential mortgage instead.
Lenders assess Buy to Let mortgage applications based on the property’s rental potential rather than the borrower’s personal income. They typically use rental stress tests to determine the maximum loan amount, to ensure that the rental income covers the mortgage payments and other property running costs.
Buy to Let mortgages often require a higher deposit compared to residential mortgages. The typical deposit is around 25% of the property’s value, although this can vary depending on the lender and the borrower’s financial situation.
Different mortgage lenders have different needs, but most expect you to already own a home. Many will also look for you to earn at least £25,000 a year. Don’t worry if you don’t meet these criteria, though; there are still options out there for you.
Buy to Let investors need to consider the tax implications, including additional stamp duty land tax, income tax on rental profits and potential capital gains tax upon selling the property. Seeking advice from a tax professional is advisable to understand the financial implications.
Buy to Let properties can be profitable, but there will inevitably be periods when the property is empty, such as during property renovations or a dip in market demand. You’ll need to ensure you can cover the mortgage payments during these periods.
Securing a Buy to Let investment typically requires a larger upfront deposit compared to a residential purchase. Most mortgage lenders will entertain your application if you can contribute a minimum of 25% of the purchase price. However, in some situations a deposit as low as 15% may suffice. As with any mortgage, the larger your deposit, the better the rates. If you already own another property, you may be able to leverage some of the equity from your existing property to enable you to secure an investment property.
Whenever you acquire a new property, whether for personal residence or as a rental investment, you are obligated to pay stamp duty land tax. Unfortunately, for landlords, the surcharges for Buy to Let investors increased in April 2016, resulting in higher charges across all property bands. As a BTL investor, you’ll usually have to pay 3% on top of regular stamp duty rates if you are buying an additional property. The Stamp Duty calculator provided by HM Revenue & Customs can help estimate this cost.
Legal fees cover the services of a solicitor or conveyancer who handles the legal aspects of the property transaction. These include conducting searches, ensuring the property has proper title deeds, and handling the transfer of ownership. Costs can vary based on the complexity of the transaction and the level of service required.
Mortgage arrangement fees cover the administrative costs of setting up your mortgage. These fees can range from a few hundred to several thousand pounds, depending on the lender and the complexity of the mortgage product. Some lenders may offer products with lower fees but higher interest rates, so it’s essential to consider the overall cost.
Lenders may charge fees for valuing the property you intend to purchase. This valuation is essential for the lender to assess the property’s worth and its suitability as collateral. As the lender considers the potential rental income to calculate the maximum amount they will lend, they will also complete their own rental valuation of the property in its current condition. The fees can vary, and it’s important to understand the valuation process and its implications for your mortgage.
You have the option to delegate the management of your investment property to a specialist property management company. However, such services come with a cost, and you should anticipate these companies charging a minimum of 10-15% of the monthly rent.
If you opt for an external company to source and vet new tenants for you, be ready to spend approximately 3 to 4 weeks’ worth of rental income.
A Buy-to-Let mortgage is specifically for purchasing rental properties and generally requires a larger deposit and higher interest rates compared to standard residential mortgages. You can read more about it at MoneyHelper’s Buy-to-Let Guide.
Typically, a deposit of 20-25% of the property’s value is required for Buy-to-Let mortgages. For more information, visit Which? Buy-to-Let Mortgage Guide.
Lenders typically assess borrowing based on rental income potential, requiring rental income to cover 125%-145% of the mortgage payment. You can learn more from MoneySuperMarket’s Buy-to-Let Guide.
Income from rental properties is subject to income tax, and there may also be capital gains tax when selling a property. For more details on this, visit HMRC’s Guide to Property Income.
Yes, you can apply for a joint Buy-to-Let mortgage with another person, provided you meet the lender’s eligibility criteria. More information can be found at MoneySuperMarket’s Guide.
Fees may include arrangement fees, legal fees, valuation fees, and stamp duty on the property. Learn more