Buy to Let Mortgages

With the recent changes to the way in which Buy to Let (BTL) properties are now viewed by Her Majesty’s Revenue & Customs (HMRC), Buy to Let Mortgages have now become a very specialist market with clients needing to carry out some research before they enter this market. Even experienced portfolio landlords now have to make far more checks to see what the impact will be on their existing portfolio and the best way forward when looking to expand their property portfolio.

The major issue that all clients must initially consider is, do they purchase in their sole name or via a Limited Company called a Special Purchase Vehicle (SPV)? There are now tax advantages to purchasing via a Limited Company and all clients should consult their accountant or a Tax Advisor to see what route that they should take before they consider making a purchase

Terms & Repayment

Mortgage Term

The term of the mortgage can be anything from 10 years up to 45 years, with some lenders taking a different view when the mortgage term goes post the normal accepted retirement date, but it is far more flexible than a normal residential mortgage, with the term extended to age 85 with some lenders.

Method of Repayment

Most clients chose to opt for an interest only mortgage, but clients can chose a capital and interest repayment if they wish, but must accept tax relief will only be given on the interest only portion of the repayment. Clients should also bear in mind that lenders may apply a stress test to the capital and interest repayment, which may change the amount that can be borrowed using the rental income to service the debt.

Max Loan to Value

Lenders are far happier with low loan to value mortgages, as the rates of interest charged on the higher loan to value products will make very clear. Lending is about risk, and yes we can now arrange BTL mortgages up to 85% LTV, but if you can bring that down to 75% LTV the interest rates and the fee structure, are far more attractive.

Ex- Pats

We would normally expect a maximum loan to value for ex-pats to be 70% LTV

HMO Properties

We now have a number of lenders who will consider HMO properties at 80% LTV but they must be fully licensed by the local authority and must meet all of the requirements set by the local authority. They are popular with investors as the income stream is generally very attractive, but this is not for first time landlords.

First Time Landlords

Lenders prefer clients to be home owners, with a minimum income of £25,000pa, and they must have a 25% deposit, this may change of course as the property market gets stronger, and lenders feel that they can be more flexible.

Bridge to Let

With the massive change in the demand for BTL properties in 2013/14 clients have been looking at properties that were in need of refurbishment, either through a private sale or at auction. We now have a new product which allows you to purchase the property, carry out the works needed, and then switch onto a BTL mortgage based on the new valuation and rental income. This product has proved to be a real winner with landlords looking to purchase under value.

See also: Bridging Loans or Commercial Mortgages.

A Mortgage 4 You Best Mortgage Buys

Mansion Park Limited is a credit broker not a lender.

Criteria for Applicants

Many lenders will accept First Time Landlords, but most lenders would prefer that the applicant has been a property owner for at least six months, but there are exceptions to this.

AGE

Age is not the issue that it used to be, but most lenders would prefer the applicant to be age 25, and at the other end many others do not have any age restriction. This area is changing as we are all living that much longer and many of us are working way beyond the normal retirement age of 65.

YOUR INCOME

Personal income is still an important part of the application particularly if you are a first-time landlord. Most lenders would require you to have a minimum income of £25,000. Although the debt is serviced by the rental income, lenders are more comfortable when they can see that you could still make the mortgage repayments in the advent of the rent not being paid by the tenant.

CREDABILITY

Your credit profile will have an impact on what terms we can offer you, making it very important that we see a copy of your credit file at enquiry stage, so we can see how we can help you and what terms we can offer you. You may have to find a larger deposit or accept the interest rate maybe a little higher if we can place your application for you, but there are a lot more lenders who will now accept an element of adverse credit, so you may get a pleasant surprise.

DEPOSIT

As a first-time landlord you would have to find a minimum deposit of 25%, and with an experienced landlord, lenders will still accept a 15% deposit. With all BTL mortgages they are stress tested on the rental income.  This will vary a great deal between lenders, more so if there are any credit issues. It is therefore very important that all clients make sure that they make sure what is a realistic rental income for the property, either from the estate agent or letting agent, so we can be certain this passes the rental stress test for the lender of choice.

PROPERTY CRITERIA

What landlords should always be aware of, is that the type of property and the location will always have an impact on how acceptable it maybe to lenders and how the underwriters are likely to view it. This highlights the importance of doing your own research into the property, not just for the lender, but what is the attraction now and in the foreseeable future for tenants.

It could be;

  1. Competitive rent for the area
  2. Access to certain schools
  3. Near to current place of work
  4. Access to road or rail links for business or pleasure
  5. Strong demand for student let (HMO’s)
  6. Seasonal demand at certain times of the year or AIRBNB

There are also certain types of property that some lenders are cautious about, or where lending maybe restricted or declined. Again, doing that extra bit of home work will help you get the correct answer that much quicker.

The property types below are some examples that are not always acceptable:

  1. High rise flats (anything above 4 storeys)
  2. Ex-local authority properties, particularly flats
  3. Non-standard construction (pre-cast concrete, timber framed, thatched roof, converted barns, reconditioned older properties)
  4. Properties above or next door to some types of commercial properties
  5. Properties with a lease of 80 years or less

BUYERS

Buyers should be aware that some lenders have a minimum purchase price, and this sometimes relates to the geographical position of the property. If you have a clean credit profile this maybe around £50,000 however if you have a credit impaired profile it can be up to £90,000. Your credit profile will determine which lenders you will have access to, which will then allow us to advise you of the property price range that you can consider.

LOCATION

You should be aware that most lenders will lend in England and Wales, but we have a restricted panel who will lend in Scotland and these maybe postcode sensitive.  There are a small number of lenders who will consider Northern Ireland.

TENANTS

When looking at the demand for rented property in any area, you should be aware that all lenders require a tenant on an AST basis, normally six or 12 months, with the rent being paid by the tenant. Where you should be cautious is where the rent is to be paid in part or whole by the DSS. Not all lenders are happy with tenants supported by the DSS, which may impact on your decision to purchase in a certain area of the Country. With regards to Higher Multiple Occupancy (HMO) we have to do a little more research to find the right lender as this is a particularly specialist field.

We are mortgages specialists with over 55 years of experience in financial services, and we spend a considerable amount of time making sure that we are knowledgeable in a rapidly changing market. We endeavour to place your enquiry at the most competitive terms based on your own personal circumstances.

What Types of Property Can you Help Me Obtain a Mortgage

What landlords should always do, is to carry out their own research on the area and what is the demand to live there and what is the driving force behind that reason. It could be access to certain schools, near to their work place, or being near to road or rail that will allow them to travel to main area’s of work.

We are seeing a number of landlords concentrating on Student let or HMO’s with more than one family in residence, the attraction being the strong income stream

With all properties the rental stress test must be meet and you need to be confident that your proposed rent is realistic for the area and the type of property.

There are certain properties that lenders will look at in more depth;

1 High rise flats

2 Ex local properties

3 Non- standard construction

4 Properties above or next door to commercial property

It is not a NO with these properties, but most lenders will be more cautious.

What landlords should always do, is to carry out their own research on the area and what is the demand to live there and what is the driving force behind that reason. It could be access to certain schools, near to their work place, or being near to road or rail that will allow them to travel to main area’s of work.

We are seeing a number of landlords concentrating on Student let or HMO’s with more than one family in residence, the attraction being the strong income stream

With all properties the rental stress test must be meet and you need to be confident that your proposed rent is realistic for the area and the type of property.

There are certain properties that lenders will look at in more depth;

1 High rise flats

2 Ex local properties

3 Non- standard construction

4 Properties above or next door to commercial property

It is not a NO with these properties, but most lenders will be more cautious.

What landlords should always do, is to carry out their own research on the area and what is the demand to live there and what is the driving force behind that reason. It could be access to certain schools, near to their work place, or being near to road or rail that will allow them to travel to main area’s of work.

We are seeing a number of landlords concentrating on Student let or HMO’s with more than one family in residence, the attraction being the strong income stream

With all properties the rental stress test must be meet and you need to be confident that your proposed rent is realistic for the area and the type of property.

There are certain properties that lenders will look at in more depth;

1 High rise flats

2 Ex local properties

3 Non- standard construction

4 Properties above or next door to commercial property

It is not a NO with these properties, but most lenders will be more cautious.

Will Lenders Accept Bad Credit

The positive response to this question is YES we do have lenders who will accept a degree of Bad Credit, the more historical the Bad Credit the more choice of lenders we will have. There will be an impact on the terms and in some cases the loan to value could be lower, but we have a lot of competition amongst lenders in this market which keeps the terms competitive. It is always helpful if we can see a copy of your credit file up front, which will allow us to give you an accurate response very quickly, we just hate to say no.

The positive response to this question is YES we do have lenders who will accept a degree of Bad Credit, the more historical the Bad Credit the more choice of lenders we will have. There will be an impact on the terms and in some cases the loan to value could be lower, but we have a lot of competition amongst lenders in this market which keeps the terms competitive. It is always helpful if we can see a copy of your credit file up front, which will allow us to give you an accurate response very quickly, we just hate to say no.

Buy to Let Mortgage Term

The term of the buy to let mortgage can be somewhere in the region of 5 to 45 years depending on the age of the applicant and in some cases the outstanding term on leasehold property or to fit in with the clients wishes.

When considering a buy to let purchase it is important to know the demand in the area in which you intend to purchase for the type of property that you are looking at. It may be worth while getting help from a letting agent who knows the area, and is a member of   ARLA (Association of Residential Lettings Agents).

There are also a number of good websites where you can get a good idea of property prices and current rental demand, ( Zoopla, Up my Street, Ladders and many more )

The letting agent may also be able to fill you in on what the likely pitfalls will be in any particular area if not you should always do your own research on the area and the market first, before you commit to purchase any property, or let A Mortgage 4 You help you today. Researching the area is an essential part of any property purchase. Always research first, find out as much as possible about the area as you possibly can, from tenant demand to any trends that may help you evaluate the areas suitability, such as employment, student demand, and access to the bus, train and road links. If you have any concerns about the crime in the area the Police have a local community officer who can advise you on areas to avoid.

By planning with consideration, and purchasing carefully, you ought to have acquired a property which does not require too much maintenance and appeals to the tenant market. You should also have taken into account initial rent void periods in which the property is uninhabited and not producing income.. When participating in a buy to let mortgage, insurance is always worthwhile to cover you in the times in which your tenant fails to keep the rent payments or causes damage to the property..

Buy to Let Mortgage on the High Street

Many of the high street banks and building societies now offer a buy to let mortgage product, together with a number of specialist lenders who tend to concentrate on the investment property sector. However some are more competitive then others, and why not let us do the research for you. Independent mortgage brokers will also be able to recommend mortgage arrangements which are not available on the high street and which should meet your buy to let mortgage requirements on the most competitive terms. Here at a mortgage 4 you we have access to the full buy to let mortgage market and with our sourcing systems and over 40 years of experience in financial services, we will find you the most suitable product on the most competitive terms.

Did you know that buy to let mortgages become so popular in 2006 that 10% out of all mortgages taken were buy to let mortgages, that percentage is even higher today. The success of a buy to let mortgage is down to the increasing appreciation and popularity of buy to let as part of your investment portfolio. Property is a great way to invest money for the long term, with the stock market being far more volatile. The UK population is growing by the day, and with this comes the greater demand for rental property, which leaves the landlords in a positive situation.

Here at a mortgage 4 you we have helped many clients arrange a buy to let mortgage with competitive interest rates as well as other added bonuses. If you are interested in buy to let mortgages, or would like to apply for one then fill out our enquiry form or call us on 0345 2 605 506.

Properties which are more difficult to place

  • High rise flats ( over 4 storeys )
  • Ex-local authority property each on its own merits )
  • Flats above shops ( down to the surveyor )
  • Non- standard construction
  • Properties let to DSS tenants
  • Properties let to more than one family
  • Flats where there is less than 50 years left on the lease at the end of the mortgage term
  • Flats where the landlord has disappeared and there is no formal management committee.

The key to buying a property as an investment is research, making sure that you purchase in an area where there is real demand for the type of property for rental, and what is a realistic rent. All lenders now build into the rent calculation a stress test that is based on what might happen to interest rates in the future, and what impact this may have on your ability to service the debt. Buying in the right area at the right price, with real demand for that type of property is essential to your success in the property market. Never buy on a whim, or after one visit, unless you have done your homework very well.

The Financial Conduct Authority does not regulate some forms of buy to lets, commercial loans or will writing, secured loans or bridging finance.