Buy to Let Mortgages
Whether properties are old, new, in need of refurbishment, ex-local authority or bought off-plan, One Stop Finance have products available to suit all circumstances.
We arrange buy-to-let mortgages for every kind of client, from first-time landlords, those with a very small portfolio up to very experienced landlords with larger portfolios.
For these more experienced buy-to-let investors and Professional Landlords with larger portfolios ensuring their property portfolio is constructed as efficiently and cost-effectively as possible, is an important consideration.
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.
- You will receive rent from your existing property and purchase another property (anywhere in the UK), 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.
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. The most generous lenders will want the rent to equal 125% of the mortgage payments at an assumed interest rate of 5%. Other less generous stress tests increase the assumed interest rate to 6% or the percentage income to equal 130%! Other lenders add additional requirements, such as the expenses of the property to the equation.
Consent To Let
Many lenders, who are granting a mortgage on your new Buy To Let property, will want to see “Consent to Let” from your existing lender. 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.
Although Lenders do not use your income, to assess the amount that they will lend, they do look to you having, in the most cases, a minimum earned income of £20,000 to qualify for a Buy to Let Mortgage. Lenders are looking for income Employed or Self Employed sources and will not consider income solely earned from the profits of a property portfolio.
This cover does vary from lender to lender so it is important to speak to an experienced advisor who understands all the small print.
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 too much.
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, 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, Make sure you do your homework and know what you are liable for. Joining an association like the National Landlords Association (NLA) will give you access to a regular magazine with a host of tips and ideas.
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.
One Stop Finance is a mortgage broker who offers a whole of market service; whether that is High Street lenders, broker only lenders, Private Banks, Offshore lenders, small building societies or specialist loan providers. As part of the Quilter 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 contact us on 020 8441 2605 or 01442 232 272. Alternatively click here for our enquiry form.