Buy to Let Mortgages

Whether properties are old, new, or in need of refurbishment, ex-local authority or bought off-plan, One Stop Finance can advise on all the available mortgages to suit all your circumstances.

We arrange buy-to-let mortgages for every kind of client, from first-time landlords, to those with a very small portfolio and up to very experienced landlords with larger portfolios.

For these more experienced buy-to-let investors, along with Professional Landlords with larger portfolios, it is essential that we ensure that their property portfolio is constructed as efficiently, and cost-effectively, as possible.

Let to Buy

This type of mortgage allows a buyer to raise money on their existing property, which must then be rented out, to assist with the purchase of a new owner occupied residence.

For many buyers, finding their new home is not the main issue, but selling their existing one can be extremely frustrating. With demand for rental property at a high, and rental incomes rising as a result, a growing number of people are looking at keeping their existing property and becoming landlords themselves.

This has given rise to the Let To Buy mortgage, which allows you to take a mortgage on your new home, whilst renting your existing home out to tenants. If you have a certain amount of equity in your existing home you can take out a Let To Buy loan without a cash deposit. Instead you simply remortgage your existing home with a Let To Buy loan, freeing up funds, to use as a deposit on the new property.

Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage.

  • You will receive rent from your existing property and, when you come to purchase another property (anywhere in the UK), you are effectively a cash buyer as you are not selling and you have therefore removed any ‘purchase chain’ below you. This could also be very useful if you have to relocate.
  • It can make all the difference in a chain situation if selling the property is proving more difficult than originally anticipated.
  • It enables you to keep your current property as a long term investment whilst the mortgage is covered by the rental income and could even become the start of a property portfolio.
  • You are not able to just rent out your home and buy another one without first switching your mortgage, as this would be breaching the terms of your current residential mortgage.
  • Instead, you’ll need to convert your residential mortgage to a buy-to-let deal or obtain consent to let – see below. This isn’t always straightforward and rates are usually higher than on residential deals.
  • If you’re planning to release equity from your current home to use as a deposit on your new home, this will add a further layer of complexity.

Affordability & Rental Income

In general, mortgage lenders calculate the maximum amount that they are prepared to lend to you, based on the value of the property and the rent achievable. They do not take your existing mortgage into consideration as a commitment; they assume your salary covers the existing mortgage payment.

Different lenders have differing rental calculations. As a general rule base rate tax payers have the mortgage payments stressed at 125% while higher rate taxpayers have a more onerous stress test of 145%. Lenders also use different notional interest rates depending on whether the ‘deal-term’ is longer, or shorter, than 5-years. Fixing your rate, again for 5+ year, can also help get a more generous stress test calculation with the end result being a larger mortgage.

Consent To Let

This term applies to those who choose not to sell their current property when looking to move to a new residential house. This shows that your existing mortgage provider is aware that the property is going to be let out and is happy for you to do so.

Some lenders will only grant this if there is good reason, for example job relocation, whilst others will accept, but may increase, the current interest rate you are paying.

Whilst there are lenders who do not ask for such consent, it is sensible to inform both lenders of your intention as not doing so can void your mortgage contract, your buildings and contents insurance, and potentially have serious consequences.

Buy-To-Let Mortgages

Most Lenders do not use your income to assess the amount that they will lend. However, they often look to you having a minimum earned income to qualify for a Buy to Let Mortgage. Lenders are looking for ‘earned’ income sources and will not consider income solely earned from the profits of a property portfolio.

This policy does vary from lender to lender so it is important to speak to an experienced advisor who understands T&C’s of all the lenders in the market.

Being A Landlord

Whilst owning rental property can be highly profitable it is certainly not for everyone. Being called at inconvenient times when things go wrong with your Buy to Let property, and finding the time to fix them, can often prove to be very demanding.

Employing the services of a good management agent will reduce this stress, but eat into your profits, so include this in your business plan.

You should also allow for the possibility of the odd void period, as this will obviously lead to a drop in income, so it is a good idea to have at least 3 to 6 months mortgage payments in an emergency account to cover this eventuality.

There are lots of rules and regulations a landlord should be aware of, so make sure you do your homework and know all your responsibilities. Joining a group, such as the National Landlords Association (NLA), will give you access to a professional body that has regular training days plus a regular magazine with a host of tips and ideas from other BTL operators.

You will need to insure the rental deposit of your tenant, if you decide to keep hold of the funds, and being an NLA member grants you a discount on the fee on your certificate of deposit from these providers.

Points to Consider

  • Not all homes are suitable for letting; for example some areas may have an over-supply of 2 bedroom flats making letting similar property difficult.
  • If your property is leasehold you will need to make sure that your lease has no restrictions on the letting of your property. You usually need to seek approval from the freeholder.
  • You must inform your building and contents insurer that the property is let or take out Landlords Insurance for the property.
  • It is important to speak to a Mortgage Adviser with access to whole of market products before proceeding.

Further Information

As a Whole of Market mortgage broker, we have access to the whole of market and can compare mortgage schemes from High Street lenders, broker only lenders, Private Banks, smaller building societies or specialist loan providers. As part of the Quilter Financial Planning network, we have access to exclusive products which aren’t available on the high street, which can make a real difference.

All our professional advisers are here to act for you, first and foremost, to help you choose the most suitable mortgage, and guide you through the process with ease.

Our Advisers and support staff are here to help smooth process from start to finish.

For more information about Buy to Let or Let to Buy mortgages,
please call us on 020 8441 2605 or 01442 232 272.

Alternatively, for our enquiry form,