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A Buy To Let Mortgage Broker specialises in Buy to Let mortgages.
A buy to let is a property bought for business purposes. Usually to make you money. They are most often taken out on an interest only basis.
This therefore means you only pay the interest off, and the mortgage level remains the same. You can take out a buy to let mortgage in your own name, or in a limited company name.
Most lenders want you to own a property already in order to get a Rental Property. This usually means owning a Residential property or another rental property. That said, some lenders will let you get this type of mortgage without owning a property already. If you’re considering purchasing a rental property, especially as a first time Landlord, you should speak to your Bank, or a Buy to let mortgage broker to see what your options are.
Usually they want to see proof of income, a copy of the tenancy agreement if it’s already rented. Possibly Bank Statements and ID as well. Lenders don’t really require much in the way of documents for a buy to let mortgage usually.
As we mentioned before. You likely already have a mortgage on a property if you are considering a rental property. But there are some key differences between a residential mortgage and a buy to let mortgage.
For a buy to let mortgage arrangement or product fees tend to be higher. Often residential mortgages have small or even no arrangement fee. Buy to let’s nearly always have an arrangement fee.
Interest rates for rental property mortgages tend to be higher. Not always though, as the Loan to value is usually lower due to putting down more deposit. Speak to your bank or a buy to let Mortgage Broker to find out what options are available.
You will probably need a bigger deposit for a rental property compared to a residential mortgage. Often you will need at least 20% of the property value, more often 25%.
Most Buy to let mortgages are interest only. This means you only pay the interest and not any of the capital. Therefore your monthly payments are lower, however any capital you want to get from the property will be from any increase in value over time.
Buy to let mortgages are usually not regulated by the Financial conduct authority. This means you don’t have the normal protections you would expect with a residential mortgage.
You will probably have to pay more stamp duty than you would if you were buying a residential property. You should seek advice from a tax specialist to find out how much tax you could have to pay before undertaking a purchase.
There are various types of Buy to Let mortgage. Generally you will get a standard buy to let, where you own a property in your own name to rent out.
You can also get mortgages for a limited company. This is where you are usually the director of a limited company set up specifically to own a rental property.
There is also House in Multiple Occupation (HMO) Mortgages. This is where you rent out your property to a few different people. A good example of this is a student let property, where each room is rented out to a different person.
If you think about all the people renting across the UK, each of those has a Landlord. So they must be worthwhile! You do need to pay tax on income from rental properties usually, so take that into account when working out if it’s for you.
If you buy a rental property generally you’ll pay no stamp duty on the first £150,000, unless it’s a second property. On second properties in the UK you currently have to pay an additional 3% Stamp Duty. As we mentioned before, to get this type of mortgage you usually own a property already. This therefore means you will likely have to pay additional stamp duty land tax.
A let to buy mortgage is when you rent out your current property to buy a new one. This is common when you are struggling to sell your property and can’t wait to move. Let to buy offers a brilliant option to carry on with your purchase. You could also use this method if your buyer pulls out late in the game, it would allow you to carry on with the purchase potentially.
Similarly to a let to buy, consent to let can be asked for from your lender if you wanted to rent out your property in the short term. For example you had a job overseas and wanted to rent your home out while you are away.
What are your future plans? It’s important to plan ahead when it comes to Rental property.
Do you want one rental property? Or ten? It’s important to plan from the start what you want to do. Do you want to have your rental property in your name, or a limited company name? It’s always important to do plenty of research and speak to the relevant professionals.
A tax advisor should be able to tell you what the best options are. A Buy to Let Mortgage Broker will tell you which mortgage is best for what you plan to do. Even an Accountant may be involved in the process.
Absolutely! If you have bad credit you may still be able to get a buy to let mortgage. However you will probably need a specialist lender. We have a whole article on this here.