Choosing the right mortgage is essential

Whether you are investing in buy to let properties for the potential income or for the potential capital appreciation, choosing the right mortgage is essential.

1 How does a buy to let mortgage differ from a regular mortgage?

Put simply, business buy to let mortgages are for properties you purchase with the intention of renting them out to a third party. Consumer buy to let mortgages are for 'accidental landlords'. Both types of buy to let mortgages differ from traditional mortgages in that:

Interest rates are 1-2% higher:

This is because Lenders view a property that you are not going to personally live in as a greater risk.  Tenants do not have the same incentives as an owner occupier to look after the property and there may be times when the rental income does not cover the mortgage payments.

The minimum deposit is 15% of loan value:

While for a residential mortgage it is possible to pay as little as 5% deposit (so £10,000 deposit on a £200,000 mortgage), Lenders like you to have a larger personal stake in a buy to let property as it reduces their risk whilst also giving them more chance of recouping  their debt should they have to repossess the property.

You are eligible for a range of tax deductibles:

These could include:

  • Mortgage interest payments
  • Rental insurance
  • Property maintenance
  • Lettings agent fees

Be sure to contact a tax expert to see the full list for your situation.

The rental income generated by the property is also taken into consideration, and can affect the amount of money a lender is prepared to offer you. Typically the rent needs to cover 125% of the monthly mortgage payment (so if the mortgage payment is £500 a month, the rent must be at least £625 a month) , which is usually calculated on a notional interest rate of 5%. However, there are a number of variations on this, and it’s important to discuss this up front, if you’re looking to maximise your borrowing potential. 

TRY OUR CALCULATORS TO SEE HOW MUCH YOU COULD BORROW OR WHAT YOUR RENT MAY NEED TO BE

Lenders may also impose other restrictions or conditions on applications for a buy-to-let mortgage such as a minimum age, being an existing home owner and/or being resident in the UK.  The property will need to be in a condition to be let and there may be restrictions on the number of bedrooms, number of floors or number of units in a block. HMO’s (Houses in Multiple Occupation) also have different rules and have separate criteria to standard residential buy to lets, and may or may not be subject to licencing by the local authority. 

2 Can I still get a buy to let mortgage if I…

…don’t own a residential property?

…want to rent out the property I own and mortgage a new one?

…am retired or am entering retirement?

…already have mortgages on other properties?

…intend to buy as a Limited Company?

…don’t have a regular earned income?

…plan to build the property myself?

…don’t live in the UK?

Possibly,
YES!

John Charcol has access to the whole of market and is experienced in finding the most suitable mortgage product for less conventional situations. Also with the upcoming changes to buy to let / let to buy, it’s never been more essential to get the right advice. Please call one of our expert advisers and we will be happy to assess your unique needs.

However, do be aware that it is considered “mortgage fraud” to either let a property while only paying for a residential mortgage, or to move into a property that you have told the lender you are renting out. Make sure you are upfront with your broker / lender about your plans during the application process.

3 How much can I borrow and what rental income do I need?

How much can I borrow?

Our ‘borrow’ calculator will give you an idea of what you might be able to borrow (this will vary greatly from lender to lender). Enter your income details and use the 'Calculate' button.

Mortgage loan calculator
First applicant

First applicant

* £
£
Second applicant

Second applicant

£
£
Result

As a guide, you could potentially borrow around:

 

Want to find out more? Call us or Email Us

Buy-to-let Minimum Rent Calculator

Our minimum rent calculator will give you an idea of what you might need to charge in rent to qualify for a mortgage on a buy to let property, whether this is a business buy to let or a consumer buy to let property.

* £ 
*

The minimum rent requirement:

Want to find out more? Call us or Email Us

These figures represent the range of loan sizes, monthly payments and rental incomes you can expect to find on the market, from a range of different rates available (subject to availability and meeting lender’s criteria). For a more specific quote tailored to your situation, please give us a call.

4 What are the latest buy to let rates on the market?

Our buy-to-let mortgages table shows a selection of deals available to give you an indication of cost, but there’s more to mortgages than the headline rate. To make sure you’re looking at mortgages that suit your individual circumstances, talk to one of our experts.

Initial Rate
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Total amount of credit
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Monthly repayments
?
Scheme fees
?
Total amount payable
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Overall rate
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Max Loan to value 65%: BTL Flexx Variable rate for term. Purchase only.
Initial Rate
1.69% Flexx Variable for term which is managed by Godiva Mortgages Ltd
Total amount of credit
£292,500
Monthly repayments
£1,195
Scheme fees
£2,007
Total amount payable
£360,767
Overall rate
1.80% APRC

Fees and charges:

Booking Fee£0
Arrangement fee£1,999
Valuation fee£0
Other fees£8
Cashback£0

Flexibility:

Overpayments allowed?Unlimited
Early Repayment ChargesThere are no early repayment charges but a fee of £125 is payable when the mortgage is redeemed

Other info:

Exit fee£125
Basic legalsPayable
Special DealFree Valuation (maximum £700).
Call now for more information: 0344 346 3672
Representative example A mortgage of £292,500 payable over 25 years on a repayment basis, on a flexx variable rate for term at 1.69% would require 300 payments of £1,195.45. The total amount payable would be £360,767 made up of the loan amount plus interest (£66,135) and fees (£2,132 which includes exit fees of £125). The overall cost for comparison is 1.80% APRC representative.
Max Loan to value 75%: BTL 2 Year 1.94% Fixed.
Initial Rate
1.94% Fixed until 02/08/2019 then 4.49% variable for term
Total amount of credit
£337,500
Monthly repayments
£1,421
Scheme fees
£2,034
Total amount payable
£542,181
Overall rate
4.10% APRC

Fees and charges:

Booking Fee£0
Arrangement fee£1,999
Valuation fee£0
Other fees£35
Cashback£0

Flexibility:

Overpayments allowed?10% per annum
Early Repayment Charges3% until 02/08/2019

Other info:

Exit fee£225
Basic legalsPayable
Special DealFree valuation (up to £1,190). Cashback of £250 on completion for Remortgages only.
Call now for more information: 0344 346 3672
Representative example A mortgage of £337,500 payable over 25 years on a repayment basis, initially on a fixed rate for 2 years at 1.94% and then on a variable rate of 4.49% for the remaining 23 years would require 26 payments of £1,420.67, and 274 payments of £1,835.71. The total amount payable would be £542,181 made up of the loan amount plus interest (£202,422) and fees (£2,259 which includes exit fees of £225). The overall cost for comparison is 4.10% APRC representative.
Max Loan to value 50%: BTL 5 Year 2.29% Fixed.
Initial Rate
2.29% Fixed until 31/01/2023 then 4.49% Variable for term
Total amount of credit
£225,000
Monthly repayments
£985
Scheme fees
£2,003
Total amount payable
£345,376
Overall rate
3.60% APRC

Fees and charges:

Booking Fee£0
Arrangement fee£1,995
Valuation fee£0
Other fees£8
Cashback£0

Flexibility:

Overpayments allowed?10% per annum
Early Repayment Charges£125, plus (5% until 31/012019, 3% until 31/01/2021, 1% until 31/01/2023)

Other info:

Exit fee£90
Basic legals0
Special DealFree Valuation. Free legal service.
Call now for more information: 0344 346 3672
Representative example A mortgage of £225,000 payable over 25 years on a repayment basis, initially on fixed rate for 5 years at 2.29% and then on a variable rate of 4.49% for the remaining 20 years would require 68 payments of £985.08 followed by 232 payments of £1,190.77. The total amount payable would be £345,376 made up of the loan amount plus interest (£118,244) and fees (£2,132 which includes exit fees of £125). The overall cost for comparison is 3.60% APRC representative