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Buy-to-let (BTL) mortgages are specifically for individuals who wish to buy residential property which they intend renting to tenants. Although a BTL mortgage is similar in a number of respects to a standard residential mortgage, there are some significant differences between the two.
Most banks and building societies (and some other financial institutions) offer BTL mortgages, but terms, conditions and costs vary enormously.
Some mortgage providers will not lend to individuals who are under 25 years of age or earn less than £25,000 a year. Lenders may impose an ‘upper’ age limit on the term of the mortgage by insisting that the mortgage is repaid in full before the borrower reaches a certain age — 70 is not untypical.
Flats, newly built property, former local authority-owned properties — or properties which are priced below a certain value — can be unacceptable to lenders. Lenders may also restrict the number of BTL mortgages a borrower can have with them at any one time. Or the lender may impose a ‘cap’ on the total amount of BTL funding they are prepared to advance to a borrower.
In common with a standard residential mortgage, the potential lender will take account of your personal credit rating. If you have any unpaid debts, County Court Judgements — or you have failed to make previous or existing loan repayments on time — the lender may not want to take you on as a BTL borrower.
When considering their decision to make an advance or not, lenders will also take into account the amount of rent the borrower is hoping to realise from the property. Unlike a standard residential mortgage, most lenders view the property’s rental potential — rather than the borrower’s salary — as the primary source of income for servicing the loan.
For that reason, BTL lenders like to see a situation where the rental income covers at least 125% of the monthly interest payment. In other words, if your monthly mortgage payment is £1,000, the monthly rent should be a minimum of £1,250. (The borrower’s projections in terms of rental income must be verified by an independent source.) The difference between the two figures should help you meet your mortgage repayments when no rent is being received, or when repairs need making to the property.
Typically, the highest loan-to-value (LTV) mortgage available on a BTL basis is 75% — i.e. you will need a deposit of at least 25% of the property’s purchase price to proceed. Borrowers who are able to put down substantially more than the minimum 25% deposit (40%+ for example) will usually qualify for more favourable rates of interest.
Because BTL mortgages represent more of a risk for lenders than standard residential mortgages, BTL borrowers tend to be charged higher rates of interest.
Survey: A surveyor will be appointed (at the borrower’s expense) to assess the property’s condition, market value and potential rental income. The surveyor will also identify any issues which could affect the property’s future value.
Conveyance: Conveyancing — which is usually conducted by a solicitor or conveyancer — is the process by which the ownership (legal title) of the property is transferred from the seller to the buyer. The seller pays for this cost.
Stamp Duty for Buy-to-let property: The purchaser may have to pay stamp duty land tax which is calculated as a percentage of the purchase price of the property — see the table below.
Property price | Stamp duty rate |
---|---|
£0 – £125,000 | 3% |
£125,001 – £250,000 | 5% |
£250,001 – £925,000 | 8% |
£925,001 – £1.5m | 13% |
Over £1.5m | 15% |
Other costs: The borrower may also have to pay arrangement and booking fees to the mortgage provider, which tend to be higher than those associated with a standard residential mortgage. It may be possible to include some or all of those fees in the advance.
Depending on the lender, the types of mortgages available to the BTL borrower are usually the same as those available to the standard residential mortgage borrower — i.e., tracker, discount, fixed rate, capped rate and variable rate.
Given that most BTL borrowers buy for reasons of investment, some mortgage options may be more appropriate than others. With a fixed-rate mortgage for example, the borrower knows exactly what their monthly repayments are going to be; other borrowers prefer tracker or variable rate loans where the monthly repayment can sometimes be lower, but the cost can vary from one month to the next.
(Many BTL buyers have a preference for interest only mortgages, as distinct to a capital and interest repayment mortgage. An interest only mortgage, is a mortgage where the monthly repayment is used solely to pay off the interest on the loan but none of the capital, which is repaid only when the property is sold.)
MOST FORMS OF BUY TO LET MORTGAGE ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
A MORTGAGE IS A LOAN SECURED AGAINST YOUR PROPERTY. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
THE GUIDANCE PROVIDED WITHIN THIS WEBSITE IS SUBJECT TO THE UK REGULATORY REGIME AND IS THEREFORE PRIMARILY TARGETED AT CONSUMERS BASED IN THE UK.
ALTERNATIVE ESTATES & FINANCIAL LTD IS AN APPOINTED REPRESENTATIVE OF TENETCONNECT LTD WHICH IS AUTHORISED AND REGULATED BY THE FINANCIAL CONDUCT AUTHORITY. TENETCONNECT LTD IS ENTERED ON THE FINANCIAL SERVICES REGISTER (www.fca.org.uk/register) UNDER REFERENCE 149826.
REGISTERED IN ENGLAND AND WALES UNDER REFERENCE 02460707
REGISTERED OFFICE ADDRESS: AS COMPANY ADDRESS
Thanks so much for your persistence and patience with our house sale – we finally moved.
Wishing you all the best for the future.
Many Thanks for your expertise but especially your patience in helping me to sell Park Road
Dear Nick
Just a huge thank you for all what you have done for John and I, we wouldn’t have done it without
your help. Sorry if Ive nagged you at all but there again I am a nagger ask Candi. If you’re every up
In Skeggy you will have to pop in. Once again Thank You very much for all your hard work.
Nick & Staff
Thanks for all the support, help, professionalism and good humour (and the cups of coffee!)
To Everyone at Alternative Estates
Thank you very much for all your help in selling my house, you stayed with me, gave me no hassle
and advertised. Cant thank you enough!
To Nick & Staff Alternative Estates
Just a small token of appreciate from Lilah, Son-in-Law Bill, Daughter Valerie and her Grandson Gary
For your services regarding Lonscale Drive
Dear Nick
Thanks for your help in selling my Sisters home. We appreciate all you have done for us. Also
Thank Carla and All the other girls who have been very kind to us.
John Maher & Staff
Thanking you for all your support over the years
Best regards Kenton & Carol
To All at Alternative Estates
Thank you for dealing with sale of Mums house in Johnson Road. It took a while but we got there
In the end thro your efforts
To All at Alternative
Thank you for all of your help and support selling our Flat, and for making it as stress free as possible.
Thanks Nick for all your help and support. Couldn’t have done it without you.
TO Carla, Nick & Everyone at Alternative Estates
Thank you all for your excellent service and diligent attention in the purchase of my Flat :)
Thank you All very much for your help. We got there in the end.
Thank you Nick
Thank you once again for the professional advice and assistance in dealing with Tenancy agreements. I’m sure I’ll be calling you again in the future for more help & assistance, so for now
Good luck for the future and look forward to meeting up with you and your staff again.
With grateful thanks for your kind help! Its much appreciated, Enjoy the Chocs!!
Dear Sue, Carla and all the Team at Alternative Estates
Many thanks for selling Ferndale Road, it’s a great relief to know its finally sold, yours faithfully
Thank You So Much
For all your help and support
To Nick & Alternative Estates
Thanks for helping us buy our first home! Sorry for all the questions, most certainly recommend you
To everyone.
Dear Nick
We would like to thank you for all your helpful advice which guided us throughout the purchase
of our first family home! We wish you all the best both professionally and personally. Thank
you again for everything!
To Nick
We’ve had withdrawal symptoms! Thank you so much for your advice, patience, humour and time whilst we have bought our first house. We’ve really appreciated everything you have done for us.
To Nick & Team
Thank you for your help
Dear Annette
Thank you
Joanna & Nick
Thank you both so very much for all that you have done for me, and the very quick sale of my home
Dear Nick
A long time coming…. Finally completed, all two weeks before Christmas and with Natalies help,
sorted for New Year. I am sending you my “grateful” thanks for all the help you gave and in
pointing us in the right direct (hopefully). Do hope you had a nice Christmas and wish you and
The Family a very Happy, Healthy and successful New Year. Od Bless again and my grateful
Dear Joanna
Thank you so much for all the hard work you put in to selling my house. I really appreciate it.
Will you also say thanks to Annette & Sue for their work as well. I feel really relaxed now,
And can start looking for a house to buy. (I now know which certificate to ask for Ha Ha)
A big thanks once again!
Nick, Sue and All Staff
Thank you all for your help in selling my house – you’re all great
To Alternative Estates (especially Annette)
Thank you for all your help and for dealing with all matters so promptly during my time at
Chaceley Close
Thank You - For all your hard work and encouragement
To Joanna
You’re so kind, Kindest regards
Dear Nick
Thanks so much for all your help, much appreciated.
To Nick, Joanna and all at Alternative Estates
‘Thank you’ for everything that you have done in organising the sale of Mum’s bungalow in Beaufort Drive.
To Annette
Thank you for all your help with our new home. I think the boys & I are going to be very happy here.
To Sue, John and Carla,
Thank you for your help and for getting ‘results’ !
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