UK Buy to Let Mortgages
We are experts in arranging buy-to-let mortgages for individuals and limited companies. We specialise in buy to let properties throughout Bristol for first time buyers and seasoned landlords
Read on to find out more about how Buy to Let mortgages work, what the lending criteria is and what kind of investment returns you can expect.
What are Buy to Let Mortgages?
Buy-to-let (BTL) mortgages are typically for landlords who want to buy property to rent it out.
The rules around buy-to-let mortgages differ from those around regular residential mortgages in and around Bristol
If you’re looking for advice on buy-to-let mortgages, we recommend that you do your research and look for a mortgage broker or mortgage advisor with a whole of market reach and who can provide independent advice.
Buy to Let Mortgages will typically differ from lender to lender and may include the following:
- Your lender may make it a condition that you already own your own home, whether outright or with an outstanding mortgage
- You should have a good credit record and not be stretched too much on any of your other short or long term borrowings, including credit cards
- You may have to provide evidence of employment income or earnings from self-employment separate from rental earnings. This is typically around £25,000+ a year – if you earn less than this, you might struggle to get some lenders to approve your buy-to-let mortgage unless you are using a specialist broker
- Lenders have a maximum age requirement which is usually around 75 years of age, although some lenders may have lower age limits
- A loan to value (LTV) limit of at least 75%, therefor you will need a minimum 25% deposit for a buy-to-let mortgage
- The amount you can borrow is based on the monthly rental you are getting or are likely to get. Your rental income should cover 125% – 165%+ of your mortgage repayments
How do property loans work?
Buy-to-let mortgages in the Bristol region, are much like ordinary mortgages but have some key differences.
- The fees can be much higher
- Interest rates on buy-to-let mortgages are usually higher
- The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%)
- Most BTL mortgages are interest-only. This means you pay the interest each month but not the capital amount. You repay the original loan at the end of the mortgage term. BTL mortgages are also available on a repayment basis
- Most BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA). There are exceptions, for example, if you wish to let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling). These are often referred to as consumer buy-to-let mortgages and are assessed according to the same strict affordability rules as a residential mortgage
Advising, arranging, lending and administering BTL mortgages for consumers are covered under the same laws as residential mortgages and are regulated by the Financial Conduct Authority (FCA).
How much can you borrow?
The maximum you can borrow in Bristol or Cheltenham is linked to the rental income you expect to receive.
Your lender will want to be sure your rental income from your property will cover the mortgage payments plus a bit extra.
Lenders usually need the rental income to be 25–30% higher than your mortgage payment.
If the rental valuation of the property is not high enough, the loan to value (LTV) the lender requires might be impacted, meaning you would need a larger deposit.
Property Investors And Developers Using A UK Limited Company Mortgages
Property investors and property developers are using limited companies to make their investments.
Using a limited company buy-to-let mortgage or property company development loan finance is becoming the norm.
UK limited company buy-to-let mortgages used to have greater interest rates.
Landlords and developers that use property investing companies or property development companies are now seeing similar commercial mortgage interest rates than those offered in personal names.
The benefit of using limited company buy-to-let mortgages is that the Section 24 mortgage interest relief cap is not a hindrance.
All mortgage interest costs within a limited company may be offset against the rental income generated.
Tax Considerations
The income you receive as rent is taxable and may be liable to income tax. This should be declared on your self-assessment tax return for the tax year it was earned.
In England, Wales and Northern Ireland, this might be taxed at 20%, 40% or 45%, depending on your income tax band. In Scotland, it might be taxed at 19%, 20%, 21%, 41% or 46%.
You can offset your rental income against certain allowable expenses, for example, letting agent fees, property maintenance and Council Tax.