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.

Tell us what type of mortgage you're looking for?

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We recommend you sort by True Cost Comparison find out more

We recommend you sort by True Cost Comparison

We suggest you use our ‘True Cost Comparison’ filter. This allows you to accurately understand how different mortgages compare by ordering results based on the total cost over a ‘deal period’, such as a two, or five-year fixed rate mortgage.

Some low interest rate deals might seem attractive, but if fees are higher they might not be the best value for you. When comparing mortgage deals our true cost comparison factors the lender fees over the length of the deal as well as your monthly mortgage payments.

For example, if your repayments are £2,000 per month on a two-year fixed-rate mortgage, plus £500 in lender fees, the total cost of the deal is £48,500.

We've found 694 mortgages that match your search

Sort by

Initial rate 1.75% then 4.99% (variable) ?
Monthly repayments £292 ?
Type/Duration Fixed  until 01/09/2020 ?
Scheme fees £2,350 ?
Cost comparison £9,625 ?

Fees & Charges

Booking fee £0
Arrangement fee £1,995
Valuation fee £275
Other fees £30
Cashback £600

Flexibility

Max LTV 75%
Overpayments allowed? Yes
Early Repayment charges 1.50% of loan amount redeemed to be paid until 01-Sep-2020

Other info

Exit fees £50
Basic legals Payable

Representative example: A mortgage of £200,000 payable over 25 years on a repayment basis, initially on a fixed rate for 27 months at 1.75% and then on a variable rate, currently 4.99%, for the remaining 22 years and 9 months would require 27 payments of £291.67 and 273 payments of £831.67. The total amount payable would be £236,671 made up of the interest (£234,321) and fees (£2,350 which includes exit fees of £50). The overall cost for comparison is 4.8% APRC representative.

More info

Speak to a mortgage expert on 0344 346 3672 or Enquire now

Initial rate 1.75% then 4.74% (variable) ?
Monthly repayments £292 ?
Type/Duration Fixed  until 01/07/2020 ?
Scheme fees £2,132 ?
Cost comparison £9,715 ?

Fees & Charges

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

Flexibility

Max LTV 75%
Overpayments allowed? Yes
Early Repayment charges 2.00% of loan amount redeemed to be paid until 31-Jul-2019; then 1.00% of loan amount redeemed to be paid until 31-Jul-2020

Other info

Exit fees £125
Basic legals Payable

Representative example: A mortgage of £200,000 payable over 25 years on a repayment basis, initially on a fixed rate for 26 months at 1.75% and then on a variable rate, currently 4.74%, for the remaining 22 years and 10 months would require 26 payments of £291.67 and 274 payments of £790.00. The total amount payable would be £226,175 made up of the interest (£224,043) and fees (£2,132 which includes exit fees of £125). The overall cost for comparison is 4.4% APRC representative.

More info

Speak to a mortgage expert on 0344 346 3672 or Enquire now

Initial rate 1.79% then 4.84% (variable) ?
Monthly repayments £298 ?
Type/Duration Fixed  until 01/05/2020 ?
Scheme fees £2,304 ?
Cost comparison £9,214 ?

Fees & Charges

Booking fee £0
Arrangement fee £1,995
Valuation fee £274
Other fees £35
Cashback £250

Flexibility

Max LTV 75%
Overpayments allowed? Yes
Early Repayment charges 2.00% of loan amount redeemed to be paid until 31-May-2019; then 1.00% of loan amount redeemed to be paid until 31-May-2020

Other info

Exit fees £0
Basic legals £0

Representative example: A mortgage of £200,000 payable over 25 years on a repayment basis, initially on a fixed rate for 24 months at 1.79% and then on a variable rate, currently 4.84%, for the remaining 23 years would require 24 payments of £298.33 and 276 payments of £806.67. The total amount payable would be £231,855 made up of the interest (£229,551) and fees (£2,304 which includes exit fees of £0). The overall cost for comparison is 4.5% APRC representative.

More info

Speak to a mortgage expert on 0344 346 3672 or Enquire now

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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON IT.

John Charcol is a trading name of John Charcol Limited and its Appointed Representatives. John Charcol Limited is authorised and regulated by the Financial Conduct Authority. The Financial Services Register number is 665649. Registered in England No. 9157892. Registered office address for John Charcol Limited is 5th Floor, Cutlers Exchange, 123 Houndsditch, London, EC3A 7BU. The FCA does not regulate some investment mortgage contracts. Calls may be recorded for training and monitoring.