Buy to Let Mortgages

We have access to over 11000 mortgages from over 90 lenders, ensuring that our customers receive the right deal on their mortgage, offering exclusive deals otherwise unavailable on the high street 

Buy to Let Mortgages

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Buy to Let Advice 

We have access to over 11000 mortgages from over 90 lenders, ensuring that our customers receive the right deal on their mortgage, offering exclusive deals otherwise unavailable on the high street. That’s why we are confident that we have the right tools to meet our customer’s needs, no matter how difficult it might appear.

We know that you’ll be delighted with our excellent service as we promise to find you the right mortgage deal. To see our huge range of Buy to Let mortgages on and off the high street, look no further.

Buy to Let Mortgages

Buy to Let Mortgages have almost become a standard offering from the majority of banks and building societies. In the past if you wanted a mortgage to buy a property to rent out you would have needed to have access to specialist lenders, or you would have needed to purchase your property with cash. This made it difficult for smaller investors to enter the market as the lending criteria was very specific and aimed mainly towards professional landlords. However, as time has gone by lenders have relaxed their stance on this and the options available to investors, whether big or small have increased dramatically.

With the right a mortgage broker or adviser from Ideal Home Loans to help you by providing free mortgage advice in Wiltshire, it has never been easier to access a Buy to Let Mortgage. Renting a property out has become quite attractive, as the long-term returns on your investment have been known to make the effort worth it. Whether you are a First Time Landlord, Portfolio Landlord or someone that wants to own a Home in Multiple Occupation (HMO), Lenders nowadays will most certainly have options available. It can still be quite a minefield and getting the right mortgage advice is as important as finding the right property.

Our specialist Mortgage Brokers offer free advice and can go through the process and tailor their advice to your circumstances. So, whether you’re just starting out on your Buy to Let journey or you’re a seasoned investor, get in touch with us at Ideal Home Loans to see how we can help.

What is a Buy to Let Mortgage?

In short, a Buy to Let Mortgage is a mortgage that is secured on a property that has or is being purchased for the sole reason of being let out to tenants. Over the years the popularity of Buy to Let Mortgages has increased. Whereas, in the past owning a Buy to Let Property was seemingly reserved for those who were professional landlords, nowadays you can find landlords that come from all walks of life and quite varying professions. We provide free mortage advice in Westbury, Wiltshire as well as nationwide.

Set up costs and product rates are different to a standard Residential Mortgage, as is the criteria on which a lender assesses an application. It is usually based on your personal circumstances and also what a lender will deem as the open market rent that may be achieved from renting the property.

Matching all the criteria and securing the right Buy to Let Mortgage can be quite time consuming and complicated. Follow the link and read our blog post ‘Advantages and Disadvantages of a Buy to Let Mortgage’, or get in touch with one of our specialist advisers to see how they can help.

Can I Get a Buy to Let Mortgage If I Don’t Own a Residential Property?

Buy to Let Mortgages are normally available to people who already own a residential property or live in their own home, either with a mortgage or totally unencumbered.

However, there is an increasing number of people who either live with friends/family or rent themselves and have in fact bought property to rent out, in order to maintain a place on the property ladder. There are a number of lenders who are happy to do business with applicants who “own” property rather than “own/occupy”.

You will need to provide full details of your current investment portfolio together with rental and income evidence.

It’s trick to obtain a Buy to Let Mortgage as a First Time Buyer, but it’s not impossible. A lender would normally expect you to be able to afford the loan on a residential basis.

As well as borrowing money in your personal name, mortgages are available to Limited Companies that are specifically created for the purpose of owning and renting property.

These “Limited Company” Buy to Let products may be suitable for some borrowers more than others. It’s dependent on an individual’s tax status and investment objectives. It is very important that you understand the main differences. Good advice from a suitably qualified accountant or tax specialist will help with this decision.

How Can I Maximise my Buy to Let rental Profits?

This is an age-old question and there are various options that you can think about.

  1. Turning your property into a HMO (Home in Multiple Occupation) can really make the rental yields increase exponentially. This option can work quite well, as effectively, you can rent on a per room basis. You will need to abide by any rules from the local council and be mindful that you’ll need to be prepared to service multiple tenants.
  2. Look for properties that potentially have good rental yields. Purchasing a property for say £250,000 may seem like a good idea as you may be able to rent it for say £850 per month. However, purchasing two properties for £125,000 each that rent for say £550 per month will provide you with more profit in the long run against the money you have invested. Your investment will also be split over two properties which will also split the risk of having void periods where you may not have a tenant in a property.
  3. Getting the right mortgage advice is just as important when looking to maximise your rental profits. An Ideal Home Loans experienced Mortgage Broker will help you access the most suitable mortgage rates for your needs as well as compare the small print. The cheapest rate isn’t always the best rate when you factor in the lenders arrangement fees and other associated costs. Getting the right product can save you of several thousands of pounds over the course of a mortgage.
  4. Choosing an Interest Only Mortgage over a Repayment Mortgage is another way to boost your rental profits. While a Repayment Mortgage will reduce your balance over the course of the mortgage, it will decrease the profit you make on a month to month basis. An Interest Only Mortgage on the other hand means you will only pay the interest element of your mortgage payment every month to the lender. This is a lot less than the amount you will have to pay on a Repayment Mortgage which will maximise your profit on a monthly basis.

There are pros and cons to both types of mortgages hence why it is important to get the correct professional advice.

What’s the best, Fixed or Tracker Buy to let rates?

This really depends on how risk averse a landlord is. While a Fixed Rate will allow you to know exactly what you pay on a monthly basis, it does quite often carry a slightly higher rate than a Tracker Rate. You will however be protected from any rate rises made by the Bank of England to their base rate. Our free mortgage advice will cover all of this.

A Tracker Rate will quite often be slightly cheaper than a Fixed Rate, but at the same time carry the risk of rising along with any rises made to the Bank of England base rate. It can sometimes be attractive to an investor as with a Tracker Rate you can also benefit from any rate reductions made to the Bank of England base rate as your rate will also reduce along with it.

Buy to Let Fixed Rates

A Buy to Let Fixed Rate fixes your interest payments for a period of time, usually 2, 3 or 5 years. During this period your rate will remain fixed and not rise or reduce. The benefit to this is you know exactly what you’ll be paying for a fixed period of time while being protected from any changes in the economy that could lead to the Bank of England Base rate increasing. In the same way if the Bank of England Base rate were to reduce then you will not benefit from it as your rate will remain fixed

Buy to Let Tracker Rates

A Buy to Let Tracker Rate is usually set at a fixed percentage above various rate indexes. The index that is used will depend on your lender and your rate will be set and ‘track’ the index for a set period, usually 2, 3 or 5 years. The index most commonly used to track is the Bank of England Base Rate. Some specialist lenders may track the ‘LIBOR’ (London Interbank Offered Rate).

In short if these indexes rise then your Mortgage Rate will rise by the same percentage, and if these indexes reduce their rates, then your Mortgage Rate will also reduce by the same percentage. Thus, either saving you money in the long term by taking a risk, or if the risk doesn’t pay off then you could end up paying more.

Tracker Rates are usually slightly cheaper than a Fixed Rate from the same lender, and therefore can offer some immediate savings. If the index your rate tracks does not change during your product term then your rate will also remain the same, and thus saving you some money against a Fixed Rate from the same lender.

BUY TO LET FAQS

Can I Port My Buy to Let Mortgage?

The term porting is simply another way to say transfer.  It is widely recognised when discussing Residential Mortgages, however, perhaps not so much when in connection with a Buy to Let Mortgage. In principle, the meaning of the term remains the same regardless of the type of mortgage. What a portable mortgage enables you to do is transfer the terms and conditions of the outstanding loan to another property being purchased should you look to sell the current property it is secured upon.

Can I Get a Buy to Let Mortgage with Bad Credit?

Owning a Buy to Let Property is an investment opportunity many people aim for and lots of people successfully achieve it.  For those would be Buy to Let Investors who find themselves with a history of bad credit this however could just appear a pipe dream.  The good news is that just as with a residential mortgage there are lenders in the market that will look to assist these potential investors.

Can Foreign Nationals Get a Buy to Let Mortgage?

For a foreign national looking to obtain a Buy to Let Mortgage it can be a difficult exercise. If living in the UK and have permanent rights to reside then all should be absolutely fine and indeed on other forms of Visa such as tier 2 the prospect of obtaining a Buy to Let should be able to be realised.  It may now depend on how long you have been in the UK and your employment status but there should still be options available to you.

If you are a foreign national however, now not residing in the UK, things tend to be that little bit more difficult. There are, however, some lenders, albeit limited in the availability, and very specialist in their underwriting, who will consider this. Do expect the background checks to be much more involved and stricter due to the additional risks the lender has in making any decisions to proceed.

Can an Expat Get a Buy to Let Mortgage?

It is quite commonplace for a number of UK residents to move abroad and for a variety of reasons, whether this be through choice when retiring or as for many, work-related. These expats may then either wish to maintain their current residential property to rent or possibly look to purchase a property for their own intended use for when they return. Regardless of the reason for their property ownership there is the possibility that an expat Buy to Let Mortgage will be required.

Can I Get a Buy to Let Mortgage on a New Build Property?

Buying a new build property is treated exactly the same for Buy to Let as for new build owner-occupied mortgages.

Minimum deposits are required, and the proposed rent will need to be sufficient to satisfy the lender’s affordability calculation, so it’s important that you do your calculations.

There may be some benefits to buying a newly built property, particularly the lack of ongoing maintenance in the early years which gives the opportunity for greater profit. There may also be some added incentives such as vendor purchase price/fees contributions including flooring and possibly white goods.

Do I Pay More Stamp Duty When Buying a Buy to Let Property?

When buying a Buy to Let property you will likely pay more Stamp Duty. In 2016, Her Majesty’s government announced changes to the rates of Stamp Duty.

Anyone purchasing an additional/second property will have an extra surcharge of 3% added to the current Stamp Duty Rates. To calculate how much Stamp Duty you may need to pay, check out our Stamp Duty Calculator below.

How Many Buy to Let Properties Can I Have?

There is actually no limit to the number of Buy to Let properties that you can own and many people now have a number of properties in order to generate income on a professional basis.

What is a Regulated Buy to Let Mortgage?

Buy to Let Mortgages that are taken purely on a commercial investment basis are not regulated by the Financial Conduct Authority (FCA) because the property is not occupied by the immediate family of the borrower.

How do I qualify for a Buy to Let mortgage?

Generally speaking, Buy to Let Mortgages are designed for borrowers purchasing or remortgaging a residential investment property and who already occupy their own home, with or without a mortgage. It may be more difficult to get a Buy to Let Mortgage as a First Time Buyer but it is by no means impossible. A lender would normally expect you to be able to afford the loan on a residential basis.

Mortgages are available to Limited Companies that are specifically created for the purpose of owning and renting property. These “Limited Company” Buy to Let products may be suitable for some borrowers more than others and it’s vital that you understand the main differences. Seeking guidance from a suitably qualified accountant or tax expert will help with your choice.

Building Societies and banks have defined eligibility requirements for this type of mortgage and although they may vary greatly from lender to lender, there are several key areas that tend to be taken into consideration;

The Anticipated Rental Income

The amount available to borrow is normally linked to the rental yield, rather than a traditional affordability calculator used for a Residential Mortgage.

Lenders tend to have individual approaches to the calculation of borrowing based on a specific rent and will factor into the decision the income tax status of the borrower and also the period of any fixed mortgage rate.

The exact calculation will be determined by the individual lender but as a guide, the rental income would usually be expected to be equally to 125% of the mortgage interest, based on a notional calculation rate of 5%. This provides an element of safety for the lender in the event of potential future rate increases.

Income and Tax Status

The need for earned income is not always essential and some lenders will consider an application even if your income is solely from rent. This is not the case with every lender, many of which will expect you to evidence a minimum income, typically £25,000 or more.

The Amount of Deposit or Equity

Subject to the rental income being sufficient based on the lender calculator, the maximum mortgage amount will be between 75% and 85% of the value of the property.

Other Rental Properties

If you have a number of rental properties, you may consider a yourself to be a “Portfolio Landlord”. This will be taken into account when considering overall lending risk.

By talking to one of the specialists from Ideal Home Loans, you will be able to talk about what you’re hoping to achieve. We’ll also help you navigate through the various steps of the application process. 

Can I get a Buy to Let mortgage on any property?

A Buy to Let Mortgage is generally available on a wide range of property types, although there will always be a number of styles of accommodation that need a specialist approach or indeed will not be suitable.

Leasehold properties are perfectly acceptable subject to the terms of the lease. Normally, any remaining term on a lease would need to be at least 70 years. A shorter term will affect the term of the mortgage and potentially the current value of the property. In the event that the lease is not suitable because of the term, a new or extended lease may be negotiated with the current owner and the Landlord.

As with a Residential Mortgage, mobile homes and houseboats tend to be excluded by lenders as suitable security.

Certain types of property may need consideration by a speciality or niche lender.

For example;

  • Studio Flats with a very limited living space.
  • Ex Local Authority Flats in larger blocks and/or with deck access.
  • Flats above certain types of commercial property, typically fast food outlets.

A lender may also take into account any other property you have in the same street/postcode area in order to limit their risk and exposure to that area.

As each lender will have a different approach to certain types of property, contact us to discuss your specific situation and we will guide you through the process. By doing this, you are more likely to avoid the disappointment of being declined by several lenders before the correct solution is achieved.

Can I get a Buy to Let mortgage on a Leasehold Property?

The short answer is yes.

Leasehold property is no different to Freehold property as long as there is a suitable lease in place. Leasehold property does have associated costs and charges, such as Ground Rent and Annual Service / Maintenance Charges, which are made in respect of the upkeep of communal areas and services carried out by the Leaseholder.

The remaining time on the lease will probably have an impact on the value and suitability for mortgage purposes.  A lease with a term of less than 70 years remaining is likely to result in a lower valuation of the property and subsequently a reduced mortgage amount and term. A new or extended lease is the usual method of dealing with this issue. This is negotiated with the current owner and the Leaseholder.

Any Leasehold related charges are taken into account by the lender as a regular commitment and will be factored into the affordability calculator used when looking at the amount that may be borrowed against the potential rental income. It is therefore vital that you familiarise yourself with any ongoing costs and establish whether these are likely to increase and therefore limit the net income of the investment.

Consideration should also be given to the owner of the Freehold. In the past, investors may have owned a leasehold property and also have in interest in the Freehold of the Building. However, this is becoming less popular with lenders who are no longer happy to accept this if the leaseholder has a significant stake in the Freehold.

Can I Get Help to Buy on a Buy to Let Property?

You cannot use the Help to Buy scheme towards the purchase of a 2nd or Investment property.

The government Help to Buy Scheme is in place to help people get on to the property ladder or move up the property ladder.

Any property purchased with the assistance of Help to Buy must be occupied by the borrower.

Are buy to let mortgages more expensive?

There are several types of costs related to mortgages such as;

  • Arrangement/Completion Fees
  • Set up and valuation fees
  • Interest Rates.

Compared to a straightforward mortgage for an owner-occupied property, you can expect a Buy to Let Mortgage to work out more expensive on a like-for-like, loan to value basis.

Interest Rates are set by lenders taking into account the commercial proposition and greater risk. While there is not a vast difference, the Buy to Let Rate will be higher. Lender completion fees vary greatly and could be up to 3% of the loan in some cases.

The majority of borrowers arrange their Buy to Let Mortgages on an Interest Only basis, for a combination reasons, including tax efficiency and for budget purposes to ensure that there is a regular net income surplus each month in order account for unexpected costs, such as repairs and possibly void periods when the property is vacant and costs are ongoing. On this basis, the capital  balance of your mortgage won’t reduce over time and will remain constant. The result of this is that over the term of the mortgage, more interest is payable in total.  This may be suited to the tax position of many borrowers but the correct advice from a suitably qualified person should be taken to make sure that the mortgage set up matches your individual circumstances and objectives.

What are the costs for a buy to let property?

Investors purchase Buy to Let properties typically for the reason of income from the rental return and/or capital gain through the hopeful increase in the property value. For many Buy to Let Owners the returns justify the risks, however, before purchasing any property as an investment you must ensure that you have taken into consideration, the costs of the property ownership.

One of the ongoing costs is any income tax liability. Remember, you are receiving an income from your rented properties.  The landscape for Income Tax is constantly changing, so if you’re in any doubt, speak to a tax specialist or an accountant to ensure you are aware of how this affects you.

Another tax to consider is capital gains.  You may have to pay tax on any profit or gain you make when you sell the property.  As mentioned above, tax can be a complicated matter for many however, ignorance is not an excuse and therefore do ensure you are getting professional tax advice for your own individual circumstances.

As a landlord you will have a legal responsibility to your tenant(s). A duty to ensure the property remains legally habitable comes at a cost so therefore do ensure you make allowances within your budget to ensure you have adequate funds for any essential property maintenance.  Remember this expense can come at a moment’s notice especially for circumstances such as a broken boiler that needs immediate attention. Different legislation and rules will also apply for Houses of Multiple Occupation (HMOs) that will likely come with their additional costs so again if in any doubt ensure you do your research first. How you decide to manage your property will also determine ongoing costs.  If you decide to use an agent to deal with the day to day activities on your behalf then expect to pay a percentage of your rental income to them to cover this cost.  This is typically between 10-15%.  You may also have administration fees to pay in regard to arranging new tenants.  If considering this route speak to your local letting agents and ask to see a copy of their landlord agreement.  The other option is to manage to property yourself.  Albeit this will look to keep your costs down to ensure you are willing and able to deal with your tenants demands and enquiries during their tenancy.

If looking to purchase your Buy to Let via a limited company do now remember that although this may have a benefit in regard to your personal tax liabilities, the limited company will still be subject to any corporation tax on profits.  There will be an initial cost to register the company with Companies House and you will also require the ongoing services of an accountant to compile and file your company accounts.

There will also be cost for your initial purchase.  These are likely to be, but not limited to:

  • Solicitors fees
  • Mortgage arrangement fee
  • Property survey
  • Stamp duty – this will likely be inclusive of the higher second property surcharge
  • Mortgage broker fees where applicable
  • Decorative costs/improvements – these may be a necessity to ensure you comply with the Minimum Energy Efficiency Standards (MEES) introduced in April 2018 and can also be an ongoing cost for you to ensure these standards are maintained.

One of the biggest ongoing costs for many is of course the mortgage.  Having a mortgage is a necessity for many Buy to Let Investors and the ongoing cost should be factored into any financial planning.  This will for many be factored in automatically when looking at the self-sufficiency of the property, however do also ensure you consider the cost of this commitment during times of rental voids.

How much deposit do I need for a buy to let property?

One of the most common questions asked when someone is considering a Buy to Let Property purchase is how much deposit is needed.  The simple answer to that question at the time of writing is 15% however, regrettably things are not quite that straight forward.

Although there are indeed some lenders that will consider a Buy to Let with a 15% deposit these are very limited the criteria to obtain this will be extremely stringent.  As such when asked, it is advised that the general rule is a higher minimum of 25%, but in many circumstances, this may need to be larger still.

When considering the amount you are able to borrow for a Buy to Let Mortgage, the most critical element to a lender is the rentable value.  In most instances this will override any minimum deposit requirement.  For example, should you be buying a property for £250,000 and a lender has the criteria of a minimum 25% deposit this would equate to £62,500 leaving a mortgage required of £187,500.

However, if the rentable value of the property meant that the lender would only provide a mortgage up to £162,500 this is the dominating calculation meaning this overrides the minimum deposit requirement, resulting in you now needing to put down a 35% deposit to proceed.  Some lenders now consider looking at overall affordability where other income such as salary can be factored into the Buy to Let Calculation and can be used to cover any shortfall the rent may give in regard to the loan amount.

This is commonly referred to as “top slicing”.

Product transfers on Buy to let Mortgages

For many Buy to Let Investors a mortgage is a necessity and as such is a cost that needs to be factored into the budget.  The amount of the monthly payment is therefore a critical part in determining the overall surplus income the property provides and ensuring you have the most appropriate mortgage product for your individual needs is therefore extremely important.  For many Buy to Let Mortgages the product, whether this be a fixed or variable rate, will have an end date when at which time the loan will revert to the lenders standard variable rate. Many Buy to Let Mortgage customers will look to secure another scheme most appropriate to their needs in readiness for when this is to happen.

The process many borrowers adopt when looking at a new rate is to look at other lenders and consider a remortgage, maybe from one lender to another.  Whilst this is an option that must be considered, here at Ideal Home Loans we not only do this when looking at the new scheme but, we will also consider what your current lender may be able to offer you as an existing customer via a product transfer.  We will then recommend what is best suited to your borrowing needs.  The overall cost is the main factor but other possible benefits of us recommending you remain with your current provider may be:

  • No additional underwriting
  • No recalculations of loan amount permitted based on rentable income
  • No property valuation required (unless it is to your advantage to do so and the lender offers this facility)
  • No solicitors required
  • Reduced paperwork for you
BUY TO LET MORTGAGE CALCULATOR

Numerous calculators are available to assist you in your potential borrowing needs; from working out the monthly payment for a specific loan amount, to giving you the information about how much your stamp duty will be based on the purchase price.  All give great assistance in providing you the information you may need but special mention is reserved for those calculators that assist any buy to let investors.

One of the determining factors when lenders calculate how much you can borrow, is the rentable value of the property in question.  Although there is no standard calculation that applies throughout the market as a whole, with each lender having their own individual way of making their calculations, a Buy to Let Calculator can be invaluable to giving you an indication of how much you may be able to borrow against the amount of rent a property can command.  This can also then enable you to ascertain how much deposit you will actually need if you are looking to purchase an investment property.

Buy to Let Mortgage Broker

Buy to Let Mortgages can be a very complex area requiring specialist mortgage advice. Buy to Let lenders have varying criteria as to how much they will lend whether it be different stress testing, age related, the maximum number of properties that can be held by an individual or Ltd company.

These are a few of the factors that have to be taken into account when choosing a Buy to Let lender for our clients. It is most important not to apply to too many lenders as this can affect your credit rating, this is where a mortgage broker who understands the Buy to Let market can assist in order to reduce the chances of this happening.

Here at Ideal Home Loans, we have the specialists who can assist you, let us do the hard work for you!

Buy To Let FAQ’s

Can I Get a Buy to Let Mortgage with Bad Credit?

Owning a Buy to Let Property is an investment opportunity many people aspire to and indeed thousands of people successfully venture down this road.  For those would be Buy to Let Investors who find themselves with a history of bad credit this however could just appear a pipe dream.  The good news is that just as with a residential mortgage there are lenders in the market that will look to assist these potential investors.

Can Foreign Nationals Get a Buy to Let Mortgage?

For a foreign national looking to obtain a Buy to Let Mortgage it can be a difficult exercise. If living in the UK and have permanent rights to reside then all should be absolutely fine and indeed on other forms of Visa such as tier 2 the prospect of obtaining a Buy to Let should be able to be realised.  It may now depend on how long you have been in the UK and your employment status but there should still be options available to you.

If you are a foreign national however, not residing in the UK, things tend to be that little bit more difficult. There are, however, some lenders, albeit limited in the availability, and very specialist in their underwriting, who will consider this. Do expect the background checks to be much more involved and stricter due to the additional risks the lender has in making any decisions to proceed.

Can an Expat Get a Buy to Let Mortgage?

It is quite commonplace for a number of UK residents to move abroad and for a variety of reasons. Whether this be through choice when retiring or as for many work related. These expats may then either wish to maintain their current residential property to rent or possibly look to purchase a property for their own intended use for when they return. Regardless of the reason for their property ownership there is the possibility that an expat Buy to Let Mortgage will be required. The good news is that there are lenders in the market that are able to cater for these applicants.

Can I Get a Buy to Let Mortgage on a New Build Property?

Buying a new build property is treated exactly the same for Buy to Let as for new build owner occupied mortgages.

Minimum deposits are required, and the proposed rent will need to be sufficient to satisfy the lender affordability calculation.

There may be some benefits to buying a newly built property, particularly the lack of ongoing maintenance in the early years which gives the opportunity for greater profit. There may also be some added incentives such as vendor purchase price/fees contributions including flooring and possibly white goods.

Do I Pay More Stamp Duty When Buying a Buy to Let Property?

When buying a Buy to Let property you will likely pay more Stamp Duty. In 2016 Government brought in changes to the rates of Stamp Duty.

As it stands, anyone purchasing an additional/second property will have an extra surcharge of 3% added to the current Stamp Duty Rates. To calculate how much Stamp Duty you may need to pay, check out our Stamp Duty Calculator below.

How Many Buy to Let Properties Can I Have?

There is actually no limit to the number of Buy to Let properties that you can own and many people now have a number of properties in order to generate income on a professional basis. Our free mortgage advice will help you with all of this.