Buy to let mortgage broker
As a buy to let mortgage broker regulated by the Financial Conduct Authority, we have access to a number of lenders that are experienced in dealing with landlords who are looking to buy a property with the purpose of renting it out.
If you are looking to obtain a buy to let mortgage, it’s important to be aware of its differences to a standard mortgage and the guidelines a mortgage lender will be following.
Buy to let mortgages explained
As the name suggests, a buy to let mortgage is for the purpose of buying a property and letting it out to a tenant(s) who will pay a monthly rental fee. The process of obtaining one is the same as that of a standard mortgage, but there are some distinct differences that are essential if you want to be a desirable borrower.
Most notably, a BTL mortgage typically requires a larger deposit and higher fees, because they are considered a higher risk than a standard mortgage. However, despite recent tax and stamp duty changes, buy to let properties can be a healthy source of income providing you keep your monthly mortgage repayments as low as possible.
Buy to let mortgages tend to be offered on an interest-only basis, so the amount you initially borrow as a mortgage will only be paid off at the end of the mortgage term and your monthly payments will consist of the interest you have accrued.
Deposits and interest rates
It’s no secret that the mortgage process is not a simple one and there are many factors involved that you need to consider and be fully aware of. Two of the most influential factors when it comes to mortgages are the deposit and interest rate. Most commonly, a deposit of around 25% is required but, if you’re considered to be a strong borrower, a lender may consider a lower deposit. As is the case when it comes to securing any mortgage, having a larger deposit will increase your likelihood of being accepted, as you won’t need to borrow as much in the first place.
Interest rates on buy to let mortgages also tend to be quite high but they are generally decided on a few different factors; such as the total amount you borrow, your financial situation, expected rental income and the type of mortgage you choose to take out. Some landlords will also rely on the rental income they receive to pay their monthly mortgage payments. So, if you face issues with your tenants paying you on time, you could then face an issue with your mortgage repayments. Lenders will, therefore, see you as a higher risk and are likely to bump your mortgage rate up to mitigate that.
When it comes to buy to let, there are other fees you are going to need to consider on top of your mortgage payments such as rental income tax, landlord’s insurance, rental insurance and potential letting agent fees.
It is also worth noting the tax changes that are being phased out for 2020, which will mean landlords are no longer able to offset their mortgage interest payments against their rental income before they make their final tax calculation. This tax change doesn’t just affect high rate taxpayers, as once rental income has been taken into account, those on a basic rate could be pushed into the higher tax band, which means they too will have to pay more tax.
Why use a buy to let mortgage broker like us?
As a mortgage broker, we have access to a number of specialist lenders that aren’t on the high street, so you can be sure you are getting access to the best mortgage deals for your personal circumstances. If you are a buy to let landlord with a large property portfolio, or you are looking to secure your first buy to let, get in touch with us today.