Lenders link this to the rental income of the property and depends on the type of property, your tax rate and the buy to let mortgage product.
This will depend on whether you’re buying for long-term capital growth or to maximize your income. Our experts will show you.
Our buy to let mortgage brokers have years of industry knowledge and this experience is invaluable to help maintain and grow your portfolio. We also have access to exclusive mortgage rates from lenders that only deal with brokers like us.
Fancy life as a landlord, or have a property you don’t want to sell yet and need to rent out? Then you will need a Buy to Let Mortgage. This is a special type of mortgage that allows a current or prospective landlord to buy a property with the intention of letting out that property to tenants. It’s a great way to get some extra income and expand your property portfolio. But things aren’t as simple as they were a few years ago and you need to know about all the recent buy to let mortgage changes (don’t worry, we are fully up to date and will guide you through them).
Whether this is to grow a portfolio, to obtain short-term capital growth or long-term income supplement, it is important to weigh up all the options with an experienced, professional broker. Low interest rates may seem attractive, but a plethora of fees and reversion rates can come back to bite.
Unlike looking for a property to live in, you need to remove emotion and consider the investment potential of the property. Below are some key considerations you should think about:-
So you’ve decided that becoming a landlord is right up your street, but what are the requirements for lenders to give you a buy to let mortgage?
As with a residential mortgage, there are the usual criteria you need to meet to be eligible for a mortgage, but as a landlord there are some extra considerations:
Your Coreco advisor will let you know exactly what your chosen lender requires but generally you’ll need:
While lenders will make sure you can afford to pay back your mortgage each month, there are also other costs to consider as a landlord. It’s well worth doing some further research into these costs as these can vary on the house you’re letting out and the area it’s in. We’ve put together some of the more forgotten costs of being a landlord below:
These are just a few of the hidden and unexpected costs of being a landlord but we’d recommend doing further research into the costs once you have an idea of which property you want to invest in.
For experienced landlords, or for those with a large property portfolio, actively managing your portfolio to ensure you have the right mortgage rate on each property or can gear up and release equity for future purchases is of vital importance when looking to grow.
We have years of experience helping landlords do just that, in fact, we have a special team of buy-to-let advisors. It may be possible to agree on a credit line or facility for you to buy additional properties quickly and cheaply, making the most of rental and capital growth opportunities.
For professional landlords, the Prudential Regulation Authority, (PRA) have been explicit in the fact that they feel buy to let mortgage lenders should be underwriting portfolio landlords, defined as anyone with 4 or more mortgaged properties, in a very different way to those with just a couple of properties.
Whether this is to grow a portfolio, to obtain short-term capital growth or long-term income supplement, it is important to weigh up all the options with an experienced, professional broker. Low interest rates may seem attractive, but a plethora of fees and reversion rates can come back to bite.
The short answer is once you’ve made an offer on your property! However, we recommend that you apply for an agreement in principle before you start looking for properties. That way you can find out if you can borrow more than you expected or save yourself some disappointment if you can’t afford the house you’ve dreamt about just yet.
As a first time buyer things can get confusing very quickly, with large sums of money and long term repayments you want to be confident you’re choosing the right mortgage product for you. Luckily your mortgage advisor will help to choose the best mortgage product to fit your needs but we’ve explained the different types for those interested!
Tracker mortgages follow the Bank of England base rate plus a few percentage points extra. For example, you might pay the current base rate of 4.25% plus an extra 1% making your total interest rate 5.25%. These types of mortgages can either track at a certain amount for a certain period of time, say 2 years, before moving over to the lender’s standard variable rate, or they could be a “lifetime” tracker, tracking at a certain amount above Bank Base rate for the whole term of the mortgage.
With a discount mortgage you pay your lenders standard variable rate and they will offer a percentage discount on the variable rate. It could look something like this, your lender’s standard variable rate is 7% and they offer you a 1% discount, so you would pay 6% interest. These types of deals, like the tracker mortgages, usually have an introductory rate before moving to your lender’s standard variable rate.
Fixed rate mortgages are exactly how they sound, you pay the same interest rate for the entire deal period regardless of any interest rate changes or Bank of England base rate changes. Fixed rate mortgages are good for those that like to know exactly how much they’ll be paying each month.
These deals tend to be offered in 2 and 5-year terms before they fall back to the standard variable rate. This when remortgaging to another product can help save some money.
Each mortgage provider has their own standard variable rate and it can be set at whatever value they like. Standard variable rate mortgages can change at any time and are mostly driven by the mortgage product market as lenders compete to offer the best rates. As there are plenty of deals to be had out there we would recommend remortgaging before you move to your lender’s standard variable rate. We recommend getting in touch with your advisor at least 6 months before your offer period ends to give you and your advisor time to find the best deal.
Unfortunately, it’s not just the mortgage you need to pay for, other costs are attached along the way. It’s best to think about these early on in the house buying process so that you have to cover these extra costs as well as your deposit.
Some mortgage providers will charge you a fee for valuing the property you’re looking to buy while others will include this as part of the mortgage but charge higher interest rates. Typical valuation fees range from £200 – £700 depending on the value of the property.
The valuation looks only at the value of the property whereas a house, building or property survey will uncover any structural and other types of issues. The most common types of house surveys are the RICS HomeCondition report, RICS HomeBuyer report and a more in-depth building survey that looks at the structure. These can range from £500 to £1500 depending on the survey and property type.
It’s also worth noting that you may need to do this more than once if you pull out of the offer due to anything found in the report or if your offer falls through for another reason.
These are the fees that are paid to your solicitor or conveyancer to cover the legal aspects of buying a property. This includes things such as:
Stamp duty is a tax you pay on all property and land transactions however as a first time buyer things are slightly different. If you buy a property in England or Northan Ireland, provided that the property you buy is £500,000 or less, you won’t pay any stamp duty on the first £300,000.
On anything between £300,001 and £500,000, you’ll pay a reduced rate of 5%. If your first house costs over £500,000 you won’t qualify for a discount on stamp duty and you’ll pay the standard rates.
Things are slightly different in Scotland and Wales, in Scotland you’ll have to pay Land and Buildings Transaction Tax which works in a similar way to stamp duty. The tax-free limit for first time buyers is set at £175,000, if your home is more expensive you can still benefit from tax relief on the first £175,000 of the purchase price. In Wales, you pay a Land Transaction Tax and there is currently no tax relief for first time buyers. However you only pay the Land Transaction Tax on properties over £180,000 which means it works out similarly to Scotland.
If you’re moving into your first home you will need to move everything from your old home into your new one. Depending on the size of your current home you might be able to hire a van and move everything yourself or if you have a lot of things it can be easiest to hire a removal company. These costs vary and depend on how much there is to move and how far it needs to be moved.
If you’re lucky enough to move into your own home at a young age the chances are that you won’t have much furniture to move into your new house. When buying your first home it’s worth checking with the seller what they plan to take with them when they move so you have a rough idea of what you’ll need. While luxuries such as a cosy corner sofa or a home office sound appealing, you’ll need to think about what you’ll need from day one. This includes essentials such as a fridge, oven, plates, cutlery and all the other daily essentials that are easy to forget.
You’ve now moved into your new house (yay!) but there are ongoing costs to consider alongside your mortgage payments. Although the exact costs will vary on a range of factors, your ongoing costs might include:
These costs can add up to £4,144 per year however this will vary depending on a range of factors such as location, house size and your personal requirements.
Your home may be repossessed if you do not keep up repayments on your mortgage. Not all Buy-to-Let mortgages are FCA regulated. This website provides general guidance and does not constitute financial advice. Mortgage rates and product availability are subject to change. Mortgage Circle is authorised and regulated by the FCA (No. 797652).