BUY TO LET MORTGAGES

Ready to invest in a buy to let property? We’re here to help.

Below you’ll find everything you need to know about buy to let mortgages, what lenders assess when applying for a buy to let mortgage and how we can help you get the most out of your investment with the bets buy to let mortgage deals

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0333 090 3221

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Buy to let mortgage intro

A buy to let mortgage is specifically for properties that are either purchased or owned with the intention of being rented out.

Most buy to let mortgages are paid on an interest-only basis, where the monthly payments are just for the interest on the amount borrowed. At the end of the mortgage, you’ll still owe the amount borrowed. You’d usually pay this back through selling the rental property or from savings you’ve built up through the term of the mortgage, but you can get buy to let mortgages where you repay the mortgage in the usual way.

If you rent out a property which has a residential mortgage, you’ll likely be in breach of your mortgage agreement. It’s important to make sure you have a buy to let mortgage on your property if you are intending to let it.

What types of buy to let mortgages are there?

Standard variable rate (SVR)

The SVR rate is set by the lender, and that can move it up and down at any time. Lenders have different SVR rates. You wouldn’t take out an SVR mortgage, this is the interest rate you would revert to at the end of your introductory period of any of the different mortgage types below.

SVR rates are typically much higher than you’d get from a fixed, tracker or discount mortgage. At the point you revert to your lenders SVR rate, it’s a good idea to get a new introductory rate.

Fixed rate

A fixed rate is a set interest rate guaranteed not to change by your lender for an initial period - Usually 2, 5 or 10 years, though you can get both shorter and longer fixed rates. Fixed rates tend to be lower than the lenders standard variable rate, which you’ll move to automatically at the end of your fixed period (Hint: it’s at this point where you’d consider moving to a new fixed rate either with the same or a different lender. Known as remortgaging).

Tracker rate

A tracker rate follows the Bank of England Base Rate by a certain percentage, usually about 1-2% higher than the Base Rate. If the Bank of England increase the Base Rate by 0.5%, your interest rate will increase by 0.5% too.

Discount rate

A discount rate mortgage is where the interest rate is set at a certain percentage lower than the lenders SVR. If the lenders SVR is 7% and your discount is 2%, your mortgage interest rate would be 5%. These mortgages aren’t too common because the SVR interest rate can be unpredictable and be changed at any time by the lender, affecting your mortgage interest rate too.

Buying personally, or through a ltd company?

Some people choose to purchase in their personal name, whereas other purchase through a company they’re a director and shareholder of. There are pros and cons of each, dependant on your circumstances and goals for your portfolio. Here’s some bits to remember:

Buying in your personal name:

  • Mortgages in your personal name are typically easier to qualify for. Lenders are only assessing you, as a pose to assessing both you and your company

  • Personal buy to let mortgages tend to have lower interest rates then their ltd company counterparts

  • There’s less admin, you won’t need to submit a company tax return on top of your personal tax return as you would if you bought through a ltd company

Buying through a ltd company:

  • Your portfolio owned by your ltd company is separate to you, which can make it easier to bring in new investors or when planning inheritance

  • You’ll have to submit company accounts, as well as your self assessment tax return

  • Directors and shareholders will be personally responsible if the company does not pay the mortgage

We offer buy to let mortgages in both personal and ltd company names. You should seek advice from an accountant to decide which option is best for you.

Considerations when getting a buy to let mortgage

Tax

When you buy a property to rent out, it is taxed slightly differently than if you were purchasing to live in. You’ll pay additional stamp duty when you purchase and you may need to pay capital gains tax on the increased value of your investment when you sell. You’ll also need to pay income tax on the rental income you receive.

Your homeowner status

Some lenders won’t allow first time buyers or first time landlords, some will have a limit on the number of properties you own when you take out the mortgage. We have lenders that will lend to all different homeowner statuses, which is why it’s important to always use a broker like Hiyve.

Deposit

Buy to let mortgages come with higher risk to the lender and often require a deposit of at least 25% of the purchase price, higher than when you buy a property to live in.

Where you live

Some lenders will require that you live in the UK to be able to offer you a buy to let mortgage.

Rental income

Most lenders factor expected rental income into account when deciding how much they’ll lend. Lenders will want to make sure that the rental income covers 125%-145% of the mortgage interest payment each month. They’ll stress test this at a few % above their average interest rate to account for potential future interest rate fluctuations

How Hiyve can help buy to let landlords

Free initial consultation

Independent advice

We'll discuss your options and give you an idea of what mortgages you're likely to qualify for without charging you a penny.

We're independent to our lenders, our advice to you is in your best interests at all times. We’re on your team.

Bespoke BTL support

Easy Application Process

Whether you’re staying with your current lender, or moving to a new one. Our remortgage process is simple and easy.

Hiyve advisers have contacts across the lettings industry, to make sure your investment comes with the best yield.

FAQ’s

  • Applications for a buy to let mortgage are assessed differently to their residential counterparts. Buy to let lenders will want to make sure that the expected rent covers the mortgage and leaves space for other expenses, whereas residential mortgage lenders are looking at your income to make sure you personally can afford the mortgage, because you won’t be receiving any rental income from the property. Buy to let mortgage rates tend to be a little higher residential mortgages.

  • Different lenders have different rules on how many buy to let mortgages you can have, either in total or just with them. Most high street lenders will cap the number of properties, whereas more specialist lenders will have much more generous limits.

  • The rates you qualify for and the amount you can borrow is dependant on the amount of rental income you expect to receive for the most part.

  • Most lenders, and especially those with the most competitive rates, will expect a deposit of at least 25%. There are lenders that will allow a deposit of 20% of the purchase price, though they do tend to be expensive, which can quickly eat into your rental profits.

  • When viewing properties, the selling agent will be able to give you an idea of how much the property will rent for. You can also check property portals like Rightmove and Zoopla to see average rental amounts in your area.

  • If you’ve got a residential mortgage and you want to rent the property out, you’ll need your lenders approval. Your lender will conduct the same checks as they would for a new buy to let mortgage application, and will give you ‘consent to let’. Before going with your current lender, you should check rates you’d get from other buy to let providers, your Hiyve mortgage expert will be able to discuss these with you.

Get in touch

hello@hiyve.co.uk

0333 090 3221

We’re available: Monday - Friday 9am - 5pm

Head office: Dallam Court, Dallam Lane, Warrington, WA2 7LT

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