Buy-to-Let Mortgages
Individual or Limited Company – Buy-to-let (BTL) mortgages are for landlords who buy property specifically to rent out. They are usually more expensive than normal mortgages.
Buy-to-let mortgages are only suitable for people who want to invest in houses and flats. Investing in property is risky and you should be cautious when taking out a BTL mortgages if you cannot afford the risk. BTL mortgages are normally only available to existing home owners whether owned outright or with an outstanding mortgage. You must have a good credit record and not be too stretched on other financial commitments such as mortgage, credit cards and loans. Most lenders impose a minimum income requirement of £25,000 per annum.
Buy-to-let mortgages are similar to ordinary mortgages but with some key differences. Interest rates on buy-to-let mortgages tend to be higher.
Most lenders who offer BTL mortgages impose a minimum deposit of 25% of the property’s value. The product fees are usually much higher.
Most BTL mortgages are Interest Only, which means you do not pay anything of the capital borrowed.
Unlike obtaining a mortgage on a property you wish to live in, BTL mortgage lending is currently not regulated by the Financial Conduct Authority (FCA) unless you wish to let the property to a close family member (e.g. spouse, child, grandparent, parent or sibling). This means that most BTL mortgages are unregulated.
The maximum you can borrow is linked to the amount of rental you expect to receive. Lenders typically need the rental income to (25 – 45%) higher than your mortgage payment.
It is really important not to assume that your property will always have tenants. There will almost certainly be “voids” when the property is unoccupied or if rent has not been paid. It is essential to have a financial cushion to draw on as when this may happen. You may also need additional funds for major repair bills, for example boiler breakdown or blocked drains.
If you sell your buy-to-let property for profit, you will pay Capital Gains Tax if your gain exceeds the annual Capital Gains Tax threshold. Rental income is also liable to Income Tax.
Finance Solutions is a trading style of Paramount Commercial Finance Limited (FRN:755216) who are credit brokers and appointed representatives of White Rose Finance Group Ltd (FRN:630772) who are directly authorised by the Financial Conduct Authority.
PLEASE MAKE BORROWING DECISIONS CAREFULLY, PROPERTY OR OTHER ASSETS OFFERED AS SECURITY MAY BE AT RISK IF YOU CANNOT KEEP UP WITH REPAYMENTS.