Buy to Let
Buy to Let mortgages (BTL) are for properties specifically bought to rent out. They are only suitable for those who want to invest in houses and flats for the rental market.
Can anyone get a Buy to Let Mortgage?
• Normally you need to either own your own home outright or have one with an outstanding mortgage – though, this is not always a requirement.
• You normally need a good credit record as with any other house purchases or remortgage transaction.
• You must not be too stretched on any other borrowings like your existing mortgage or on your credit cards
• You will find it harder to get a buy to let mortgage unless you earn at least £20,000 a year. Some lenders don’t require a minimal level of income and this does not necessarily need to come from employment or self employment.
How do Buy to Let Mortgages work?
They work in the same way as other mortgages except:
• Interest rates tend to be higher
• The minimum deposit is usually 25% of the property’s value – some may be higher or lower
• The fees tend to be higher
• BTL mortgages are unregulated by the Financial Conduct Authority (FCA) unless you wish to let the property to a close family member or if it is treated as a ‘Business BTL’.
• Most BTL mortgages are interest-only, whereby at the end of the mortgage term you repay the capital in full
How is my BTL classed?
A business BTL mortgage will be deemed as ‘business’ if you are either buying or remortgaging a property which has been acquired with the intention of letting it out. Any advice provided in respect of your business BTL is not regulated by the Financial Conduct Authority (FCA) and this means that you will not receive the protection of the Financial Services Compensation Scheme (FSCS) and may not be entitled to refer any complaints to the Financial Ombudsman Service (FOS) should the need arise.
A consumer BTL mortgage will be deemed as ‘consumer’ status, due to the property you intend to mortgage being;
• A property which you purchased as your main residence, but you now intend to let out, or
• A residential property which you have inherited and intend too let out
Any advice provided in respect of your Consumer BTL is regulated by the Financial Conduct Authority (FCA) and this means that you will not receive the protection of the Financial Services Compensation Scheme (FSCS) but will be entitled to refer any complaints to the Financial Ombudsman Service (FOS) should the need arise.
Should you be in any doubt as to which category your BTL falls into we can advise you accordingly.
How much can you borrow?
The maximum you can borrow is linked to the amount of rental income you expect to receive. Typically lenders need the rental income to be 25% higher than the mortgage payment.
Where can you get a Buy to Let Mortgage?
AscentiaUK can help you choose the most suitable deal available to you from the range of mortgage lenders on the market.
What if I don’t have a rental income coming in?
You need to assume that your property will have time when it does not have any tenants. You will need to have a savings surplus you can use to meet your mortgage repayments. You will also need savings to cover the costs of bills, for example if a boiler breaks down.
Can I sell my property to repay the mortgage?
Do not assume you will be able to sell your property to repay the mortgage. House prices might fall or you may not be able to sell for as much as you expected. You may have to use your savings to make up any shortfall.
Buy to Let Tax
If you sell your BTL property, you will have to pay Capital Gains Tax if your profit exceed the annual Captial Gains Tax threshold.
Rental income that exceeds your mortgage interest payments and certain allowed expenses are liable to Income Tax.
Your home may be repossessed if you do not keep up repayments on your mortgage.