Buy To Let Archives - Page 3 of 3

First-Time Buyer Buy-to-Let

by Dax McLeanPosted on 25th June 2021 | Updated 20th January 2023

Becoming a landlord can be tempting, including the financial investment opportunities however there are many considerations to factor in such as understanding the industry’s legislation covering both tenants’ rights and the health and safety of the property, plus the financial impact of running such a business, for example, the property costs plus the expenses involved in renting out property.

In this post, we will be discussing the elements that should be considered when becoming a first-time landlord, including whether a first-time buyer can obtain a buy-to-let mortgage.

First-Time Buy-to-Let Mortgages

A buy-to-let mortgage is a financial product that is specifically for landlords who plan to rent out a property, and not reside within it themselves.

Often, buy-to-let mortgages will have higher interest rates applied in comparison with standard residential mortgages, however, it is common for landlords to opt for interest-only mortgages, keeping the monthly repayments low as the instalment only covers the interest due, leaving a capital balance at the end of the mortgage term.

It is more common for first-time buyers to be seeking a standard residential mortgage however it is not impossible for first-time buyers to be able to become landlords with an appropriate mortgage product to fund the purchase of the property to rent out.

There are likely to be a few challenges to face as a first-time buyer, as potential lenders will be more risk-averse to those without a history of repaying a mortgage, or without assets to put forward as collateral.

Due to these reasons, there will be fewer lenders on the market willing to offer buy-to-let mortgages to first-time buyers and therefore it is recommended that financial advice is sought ahead of making an application so that all financial options can be researched.

Mortgage brokers can assist with advising aspiring landlords to help find the most appropriate lender and financial product for personal circumstances.

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What Deposit with a First-Timer Buyer Need for a Buy-to-Let Mortgage?

Generally, for most types of mortgages, lenders can offer more favourable terms when applicants can put down a higher deposit.

This is especially the case for first-time buy-to-let mortgage applicants as lenders cannot be reassured by a successful history of mortgage repayments.

Typically, first-time buy-to-let mortgage applicants can expect to need to provide at least a 25% deposit of the property price to be put down to be able to proceed with a purchase.

Some lenders may require a larger deposit depending on the personal circumstances of the applicant and the lender’s borrowing criteria, however, should a large deposit be out of reach, there may be other options that still enable a buy-to-let mortgage to be obtained including adding a friend or family member as a joint applicant.

It is important to note that there are other costs to consider in addition to the deposit such as application fees, arrangement fees, valuation fees, transaction fees and stamp duty plus the interest payable.

To discuss all options available for your personal situation, as well as the likely costs involved with setting up a property for rent, please make an appointment with a member of our friendly team of expert brokers.

What Documents Will be Required to Obtain a Buy-to-Let Mortgage?

The documentation needed to apply for a buy-to-let mortgage is the same as that needed for a standard residential mortgage, such as:

Form of Identification
Proof of address, usually covering a three-year period
Proof of income

The requirement to provide other documents will depend on the lender’s criteria. Some lenders may require further details in relation to proving affordability or a business plan laying out the financial viability of becoming a landlord.

Can I Obtain a First-Time Buy-to-Let Mortgage with a Bad Credit History?

It is likely to be even more tricky for a first-time buyer with a bad credit history to be able to obtain a buy-to-let mortgage, however, depending on the severity of the bad credit history, it may not be impossible.

While high street lenders are unlikely to even consider an application from someone in this position, specialised lenders may as they will review each application on a case-by-case basis, and therefore for the best chances in obtaining a buy-to-let mortgage with a history of bad credit, liaise with a mortgage broker who can review your personal circumstances and advise the most appropriate lenders to approach.

What Terms Will be Offered for a First-Time Buy-to-Let Mortgage?

Unfortunately, we cannot specify typical first-time buy-to-let mortgage terms within this article as each scenario and personal circumstances will differ and therefore lenders will tailor their mortgage terms in relation to the risks associated with the application.

As we have touched on, in general, buy-to-let mortgages will have higher interest rates however there are still options to be reviewed such as:

The type of mortgage – either interest only or capital repayment
The type of interest status – either fixed-rate or tracker

To discuss the most suitable type of buy-to-let mortgage for your requirements, please contact our friendly team to book a consultant appointment.

How much Rent Can Be Charged?

The amount of monthly rent that can be charged will depend on a range of factors including; the location of the property, the market conditions, the property size, whether it will be let furnished or not if there will be a provision of white goods and the local facilities.

Often lenders will be interested to know how much a landlord plans to receive in rent and may request the details to be submitted within a business plan.

Some lenders will have specific lending criteria in relation to the level of rent expected compared with the monthly mortgage value to ensure affordability.

If a business plan is required, other costs that may be required to be included are costs of marketing the property for rent, costs of furnishings, maintenance costs, insurances, income and capital gains taxes, the cost of any third-party services and the possibility of any rent arrears or lapses of rental income while the property is unoccupied.

Other Considerations When Seeking to Become a landlord

We have briefly mentioned that in addition to obtaining a mortgage to fund a buy-to-let property, there are also other considerations to consider before leaping into the role of a landlord.

Significant research should take place to understand the legal responsibilities taken on when becoming a landlord, as well as finalising a full business plan including all costs involved in running the business.

First-Time Buyer Buy-to-Let Summary

In this post, we have discussed the hurdles that may be faced when seeking a buy-to-let mortgage as a first-time buyer.

We have also touched on the legal responsibilities and other costs that becoming a landlord is likely to include and therefore advised that thorough research is required ahead of making a mortgage application to understand all the commitments.

Should you need any assistance or advice, our friendly team of financial advisors are at hand so please get in touch with us today to book your initial consultation.

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Buy to Let Mortgages for First Time Buyers

by Dax McLeanPosted on 18th March 2021 | Updated 20th January 2023

Typically, a first-time buyer is often thought of as buying their own first property to live in themselves, however, if you have desires of becoming a landlord when you first purchase a buy to let property, this guide will help navigate you through the process.

There may never be a perfect time to take that first leap of becoming a landlord and there are many factors to consider including:

Being knowledgeable of a wide range of legislation.
The additional costs involved when renting out property.
The costs of financing the purchase of a buy to let property.

Buy to Let Mortgages

A buy to let mortgage is a method of borrowing that is specifically for landlords who plan to let out a property, and not live in it.

Typically buy to let mortgages usually have higher interest rates attributed to them compared with standard residential mortgages.

However often landlords will seek interest-only mortgages where the monthly repayments only cover the interest due, leaving a capital balance at the end of the mortgage term.

Being a first-time buyer can be slightly more challenging in any circumstances as lenders assume there are further risks involved without a history of mortgage repayments, however for a first-time buyer seeking a buy to let mortgage, the risks to lenders will increase further.

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As such, buy to let lenders to first time buyers are likely to request higher deposits, typically around 25% of the property price to be put down to be able to proceed with a purchase.

Should the large deposit required to proceed with a buy to let mortgage be out of reach, there may be other options available such as a joint application with a family member, a gifted deposit or a guarantor mortgage.

In addition to the deposit, there will also be other costs of obtaining a mortgage such as application fees, arrangement fees, valuation fees, transaction fees and of course the interest payable.

Stamp duty will also be likely to be due as although you are maybe a first-time buyer, to purchase a property for letting out will exempt the purchase from any discounts.

Other Considerations When Seeking to Become a Landlord

In addition to obtaining a mortgage to finance the buy to let project, significant research will need to be undertaken into what legal responsibilities you will be taking on as a landlord, plus the costs of letting out a property and the administration involved. Firstly, let’s look at the legal responsibilities.

Legal Responsibilities

There are a number of legal responsibilities that a landlord will need to ensure that the property is compliant with before letting it out including:

Energy Performance Certificate, or EPC – Current legislation for privately rented properties requires that an EPC must be undertaken, and the advertised property must have a minimum performance rating of an E grade. Should an EPC be issued at less than an E grade, improvements must be made to the property to boost up the score before marketing.
Safety – Electric safety inspections must take place and the outcomes must be documented.
Compliance – Landlords must comply with the Tenant Fees Act and Tenancy Deposit Schemes.

In addition to complying with current legislation, a landlord is also responsible for ensuring that they are kept up to date with forthcoming changes to legislation and implementing changes as and when required.

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Tenant Rights

Before marketing a property to let, it is highly recommended that significant research is undertaken into Tenant Rights. The consequences of not understanding the rights of tenants can result in large fines or even personal prosecution.

In summary, a tenant’s basic rights include:

The right to live in a property that is safe and kept in a good condition. The tenants also have the right to view the EPC for the property that they rent.
The right to have their deposits returned at the end of their tenancy.
The right to be protected from unfair eviction.
A tenant also has the right to know who their landlord is.
A tenant has the right to live within a rented property undisturbed.

Need more information? Read our related quick help guides:

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Other Costs of Letting Property

As we have briefly mentioned, there are other costs to be aware of when letting out property, including:

The costs of marketing and renting out the property – Some landlords use a letting agent to assist with the management of renting out property including advertising, undertaking viewings and the necessary legal checks on the tenants, however, these services also come with a cost.
Furnishings – Properties can either be leased furnished or unfurnished, however, either way, to protect both the tenant and landlord, an inventory should be undertaken at the beginning of a lease documenting the condition of the property and any furnishings.
Maintenance costs – Ad-hoc costs of repairs and maintenance will need to be paid to maintain a rental property appropriately.
Insurances – Buy to let insurance will cover the property itself as well as landlord liability, however it is also highly likely that building insurance will be needed as this is often a requirement from the lender.
Taxes – We have already mentioned the initial stamp duty due when purchasing a property, however, there are other taxes to consider when letting out property including income tax and capital gains tax. For specific tax planning advice, it is highly recommended that specialised financial advice is sought.
Missed payments, rental disputes and periods of unoccupancy – A landlord should
also, be mindful of circumstances that could result in lapses of rental income such as
the gap between tenants or a tenancy dispute and plan for such events.

Buy to let mortgages for first time buyers summary

Becoming a landlord is an exciting opportunity however there are many elements to thoroughly research and consider, including all of the responsibilities that will also be taken on.

All of which is in addition to navigating the mortgage market and the mortgage application process.

However, our friendly team of financial advisors are at hand to provide help and advice on which specialised lenders would be appropriate and the likelihood of a first-time buyer applicant being accepted for a buy to let mortgage with specific lenders.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Can I Buy a House and Rent it to a Family Member?

by Dax McLeanPosted on 18th March 2021 | Updated 20th January 2023

Renting out property is a big financial decision and responsibility at any time, but where a family are involved there are additional factors to consider including if the type of mortgage in place permits that the property is rented.

Buying a property to rent out can be a great investment however over recent years the legislation has tightened up regarding the requirements needed to rent property including energy efficiency, health and safety and right to rent rules.

This guide will discuss the considerations involved with letting out the property to family members.

Mortgage Types and Renting

Should a property be owned outright and therefore there is not a mortgage lender involved, the homeowner can decide who he or she rents out the property to.

However, should a standard residential mortgage be in place against a property that a homeowner wishes to rent out, permission would need to be sought from the mortgage lender.

Not every mortgage lender would approve a current residential mortgaged property to be rented out, especially to family members and therefore it may be necessary to switch mortgage products or lenders to enable the lease.

If a property with a standard residential mortgage is rented out without the necessary permission, it is likely that the mortgage terms would be broken, which could incur penalties.

The most appropriate type of mortgage for renting our property would be a buy-to-let mortgage.

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What is a Buy-to-let Mortgage?

A buy-to-let mortgage is a specific financial mortgage product designed for investors who wish to let out a property, and not live within it.

Typically, a buy-to-let mortgage will have the same options as a standard mortgage such as various interest options from fixed rate, variable rate and tracker mortgages, however, the interest rates can be higher with a buy-to-let mortgage.

One difference with a buy-to-let mortgage versus a standard mortgage is that buy-to-let mortgages often require high deposits, usually between 25% and 40% loan to value rate.

There are different types of buy-to-let mortgages including an interest-only option, which is very common with investors, to be able to keep the monthly mortgage repayments low.

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Where the property is planned to be rented out to a family member, a specific type of mortgage would be recommended, a regulated buy-to-let mortgage.

The buy-to-let mortgage market is not regulated by the FCA, however as lenders see letting out the property to family members as an increased risk, the mortgage needed would fall under tighter guidelines than a common, unregulated buy-to-let mortgage.

Typically regulated buy-to-let mortgages will not have the most competitive interest rates and there will be a smaller selection of lenders offering this type of mortgage product and therefore the use of a mortgage broker may be the best approach to seek the most favourable interest rate and terms.

The criteria and terms of a buy-to-let mortgage will vary between lenders however often lenders of regulated buy-to-let mortgages will be interested in the affordability of the borrower, more than the level of rental income available.

Second Home Mortgages

An alternative option to a buy-to-let mortgage could be a second home mortgage.

This type of financial mortgage product works in the same way as a standard mortgage, however, the lender is aware that the property is not the main residence of the borrower.

Again, permission would need to be sought from the lender to rent the property out to a family member.

Not all mortgage lenders offer second home mortgage and therefore a mortgage broker would be best placed to advise the options available.

How much can be borrowed?

Both typically buy-to-let mortgages and regulated buy-to-let mortgages would review the possible rental income from the property, by accessing the open market rental value.

As a rough guide of the lending criteria, the rent should cover 125%-145% of the mortgage repayments. However, as briefly mentioned already, with a regulated buy-to-let mortgage, the affordability of the borrower will also be a factor to the lender.

The amount that can be offered by a lender will also depend on the deposit available to be put down by the borrower. Typically, a borrower should expect to have a deposit of at least 10% of the purchase price, and for a second residential mortgage, at least 25% deposit for a buy-to-let mortgage.

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What should I Consider When Renting to a Family Member?

Contract – Although you might not think it is necessary to put a proper contract in place when renting property to a family, it is highly recommended that you do so. When someone makes regular payments for a service, it could be seen that an unwritten tenancy agreement has been put in place, protecting the tenant and therefore a contract is recommended to protect the rights of the landlord.
In addition, should the property have a regulated buy-to-let mortgage in place, then the lender will require that an assured shorthold tenancy agreement (AST) contract is in place.
Tax implications – No matter who the property is rented out to, stamp duty would need to be paid on the purchase of the property and rental income will still need to be reported for income tax and capital gains tax reporting.
Maintenance costs – Another reason to ensure that a contract is put in place is to have a written agreement listing who is responsible for the costs of repairs and maintenance. It is highly recommended that an agreement is put in place to ensure that there is no grey area regarding responsibilities, which can result in disputes.
Insurances – Insurances will be required covering both the property itself (often, building insurance is a requirement of the mortgage lender), and the contents. Again, it would be worth clarifying who is responsible for the insurances within a contact.

Can I buy a house and rent it to a family memory summary

Buying a property to rent to a family member can be complicated and should be researched thoroughly before making a commitment.

As we have discussed, a buy-to-let mortgage is quite different to a standard residential mortgage and therefore there are many factors to review, including the level of rental income that could be gained, both on the open market and via a family member as well as the tax implications.

Borrowers exploring this option are highly recommended to obtain independent financial advice, ensuring that the best financial product is sought for the personal circumstance and that their interests and investments are protected.

Call us today on 03330 90 60 30 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

Portfolio Mortgages for Landlords | HMO Mortgages

by Dax McLeanPosted on 28th January 2021 | Updated 20th January 2023

Portfolio mortgages are a relatively new type of financial product designed to streamline landlord finances.

Multiple recent, and additional forthcoming tax legislation changes have resulted in reduced tax reliefs available for landlords to claim, and therefore many sole trader landlords are considering changing their business profile to a limited company and researching portfolio mortgages.

This guide will explore the purpose of portfolio mortgages as well as common application criteria and benefits of this type of finance.

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What is a Portfolio Mortgage?

Portfolio mortgages have been designed to simplify the finances for landlords by pooling all of their buy to let mortgages under one financial product.

Portfolio mortgages act as one single account managed by one lender and therefore have one monthly payment. The benefits enable simplified cash flow management, as all mortgage payments are consolidated, but also could reduce banking and transaction fees.

Most lenders will have their own definition of a property portfolio holder, however, generally, the term is associated with landlords that let out a minimum of four properties.

Portfolio mortgages are suitable for landlords that have registered as a limited company.

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What are typical Portfolio Mortgage rates?

As lenders take on more risk by mortgaging an increased number of properties, the mortgage interest rates tend to be higher than those offered by traditional methods. Also, lenders take the consideration that if a limited company owning a property portfolio goes bust, lenders often find it very difficult to recover the debts.

Although, saying that, as portfolio mortgages become more common, the interest rates offered will become more competitive.

Portfolio mortgage interest rates are calculated by reviewing the existing rates across the entire portfolio. For example, with a traditional buy to let mortgage, each property would have its own interest rate, but these would generally be averaged with a portfolio mortgage.

In addition to the minimum four properties within a portfolio, lenders will often require other criteria to be met such as requiring the portfolio to have a minimum of £500,000 worth of value. The rental income generated from the portfolio is usually required to be between 120% and 140% of the loan repayments also.

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Advantages of Portfolio Mortgages

As with any financial product, there are many considerations to take into account when reviewing if it is suitable for the requirements and if it is cost-effective.

There are a number of advantages that are associated with portfolio mortgages as follows:

Tax efficiency – The use of portfolio mortgages enables limited companies to manage their tax liabilities in the most efficient way by treating the entire portfolio as one, rather than paying tax calculated on net income. This enables landlords to retain funds within the portfolio for renovation purposes or for further property investments and subsequently pay a lower rate of corporation tax due to the accounting treatment of expenses.
Simplification of finances – As already mentioned, a portfolio mortgage incorporates all buy to let mortgages into one and therefore reduces the number of payments. Also, one lender is used and therefore communications become simplified and easier. Another benefit of having one streamlined mortgage for an entire portfolio rather than individual mortgages is that underperforming properties can be hidden within the pool, as long as they are offset by the rest of the properties. This can be helpful as often underperforming properties can ring alarm bells for lenders who in turn may monitor the landlord more carefully to assess their risk.
The utilisation of equity within the portfolio – As the finances of the portfolio are managed as a whole, the equity can be utilised to finance additional investment by further borrowing against the equity within the portfolio. This can enable the growth of the property portfolio with little or no cash deposits which helps the cashflow.

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Disadvantages of Portfolio Mortgages

The disadvantages would really depend on the individual circumstances of the landlord, and the current business set up. For example, if the landlord was not already registered as a limited company, this additional administration step would be required before an application for a portfolio mortgage which can take both time and money.

Meeting the portfolio mortgage criteria may be a hurdle for some landlords and therefore this would be a consideration when reviewing financing options. Also, if the portfolio finances are not in such good shape, having one mortgage payment a month may not ease the cashflow situations as individual mortgage repayments may currently be spread out across the month.

However, if mortgages are already in place funding the properties, there are not any additional risks to the landlord by moving to a streamlined structure such as a portfolio mortgage.

As with any mortgage product, the risk is on the property owners to make the repayments otherwise the properties associated are at risk of being repossessed by the lender. With a larger portfolio, obviously, these risks are greater, however, landlord insurance can be put in place to minimise the financial risks of unlet periods.

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Portfolio Mortgages Summary

As every landlord’s circumstances and the background will differ due to many factors such as the number of properties within its portfolio, how the portfolio is managed; either directly or by a management company or the equity level, landlords will require specialist advice on the best approach to managing their finances.

Also, as a portfolio mortgage is a relative niche financial product, a specialist mortgage broker would be required to review the individual circumstances mentioned above, and the market conditions in order to provide tailored advice.

It is always worth seeking independent financial advice during the review stage, for example before any current fixed-term mortgage rates expire before committing to any future financial decision.

Also as mentioned throughout this guide, the finance products are chosen, and the business structure can have tax implications and therefore any decisions should also be taken into account with tax and business planning considerations.

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Switching to a Buy to Let Mortgage

by Dax McLeanPosted on 14th January 2021 | Updated 20th January 2023

Over recent years, as the property market has developed and the rental market has boomed, it has become increasingly common to switch from a residential mortgage to a buy to let mortgage.

If you want to make the switch from a residential mortgage to a buy to let, you will need to seek consent from your current lender.

If they decline your request, you may have the option to remortgage with a new lender. This may incur charges.

Converting your mortgage depends on the following factors:

Current type of mortgage.
Consent of the lender.
Other mortgages you have.
The plans you have for the property.

How to convert your mortgage to buy to let

Switching your mortgage type can have major financial implications and so it’s important to do your due diligence. If necessary, make sure to consult a mortgage advisor to have any questions answered. You can contact us today for a free no-obligation chat.

A buy to let mortgage and a residential mortgage are very different, for example, you may be able to increase your rental income, where this would not have been an option with a residential mortgage.

If you are considering changing your mortgage with your current lender, be aware that you will only be presented with their rates. Our mortgage advisers will be able to search a wide range of different UK lenders to find you a range of competitive deals.

Common switching from residential to buy to let scenarios

Buying a new home and switching your existing home to a buy to let

Converting a current residential mortgage to a buy to let and then buying a new property is common. Often, these are referred to as let to buy mortgages, the principle is essential that you rent the property rather than selling it.

Remortgage to a buy to let

If your request to switch is rejected by your lender, or it’s not suitable for your situation, you may have the option to remortgage to a completely new product with a different lender.

For example, if you want to use your existing home to fund the purchase of your new home, the rental income could then be used to reduce payments on your new residential mortgage.

Another common purpose for wanting to remortgage and switch is if you paid a higher price than your properties current value. Remortgaging to a buy to let allows you to hold the property and wait until it goes back to a value at which you would consider a sale.

Common reasons people convert from a residential to a buy-to-let mortgage

There is a range of scenarios that could lead to a homeowner seeking to switch the type of mortgage they have in place including:

Inheritance – A homeowner could inherit property and move into it, therefore leaving the mortgaged property empty and available for letting out. Other factors could be at play within this scenario such as inheritance tax.
Property not selling – Should property a chain breakdown, but a homeowner be able to continue to purchase their desired property in other ways, the result could be that the original mortgaged is not sold at that time. The homeowner may wish to explore a rental income from the property for a set period of time before attempting to sell on. Market conditions could be at play delaying the sale such as a dip in the market or changes in government schemes such as stamp duty.
Temporary Relocation – A homeowner may be required to relocate for a set period of time for reasons such as a job opportunity or family circumstances. The result of which may be that the homeowner moves into rental accommodation at the new location, leaving the mortgaged property vacant and available to let out.

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What is a Buy to Let Mortgage?

A buy to let mortgage is a financial product specifically targeted at investors who plan to let out a property, and not live within it.

Buy to let mortgages often require high deposits of between 25% and 40% loan to value rate and can have high-interest rates attributed to them in comparison to standard residential mortgages. Buy to let mortgages can also have higher lender arrangement fees.

There are different types of buy to let mortgages, however, most investors seek interest-only mortgages. With this type, the monthly repayments cover the interest due only, and therefore the capital balance remains at the end of the mortgage term.

Interest-only mortgages carry higher risks for the lender and therefore may often have higher interest rates. Like standard mortgages, buy to let mortgages can be obtained with varying terms in relation to interest such as:

Fixed-rate – Usually fixing the interest rate linked to the mortgage for a set period of time, often between 2 and 5 years.
Standard variable rate – This is the long-term interest rate often applied once an introductory offer ends on a mortgage.
Tracker – A tracker rate follows the Bank of England base rate at a set percentage higher and will vary if interest rates change.

The criteria and terms of a buy to let mortgage will vary between lenders however often lenders will require that the rental property income is higher than the mortgage payment each month.

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Need more information? Read our related quick help guides:

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Other Considerations

There will be many other factors to consider when researching letting out a property including:

The costs of renting out the property – A decision of whether to use a letting agent or not to manage the processes of renting the property from advertising, undertaking viewings and the necessary legal checks on the tenants. Should a letting agent be used, the fees of their services will need to be factored into the business plan of the investment.
Maintenance costs – The costs of repairs and maintenance will be factored into the calculations of the costs.
Insurances – Buy to let insurance covers the property itself, its contacts as well as landlord liability. Building insurance is also likely to be needed as a lending criterion.
Taxes – There is a range of taxes to consider when renting out property including; income tax, capital gains tax and the initial stamp duty due when purchasing a property.
Missed payments, rental disputes and periods of unoccupancy – An investor should also consider the consequences of situations when rental income does not materialise either due to a dispute, personal circumstances changing of the tenants or through periods of unoccupancy.

Switching to a Buy to Let Mortgage Summary

As with any financial decisions, research and consideration of all viable options and other factors at play are strongly recommended.

Borrowers are encouraged to seek advice from an independent financial advisor who is extremely knowledgeable of the different types of mortgages available, their application criteria as well as the market conditions.

As discussed, negotiating with the current residential mortgage lender to switch financial products could often be seen as a simpler process. However the interest rate, terms and fees may not be the most competitive, and therefore by approaching a financial advisor, the whole market can be explored for the best rates and terms.

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As a buy to let mortgage differs significantly from a standard residential mortgage, all factors should be considered, including the likely rental income that could be achieved as well as options to maximise this.

As also briefly mentioned above, tax planning will also need to be considered both on the initial investment and the income received from the rental properties and therefore specialised, personal advice is likely to be invaluable in the long run.#

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Remortgaging a Buy-to-Let Property UK

by Kristian DerrickPosted on 15th December 2019 | Updated 9th March 2023

Can I remortgage a buy-to-let property?

The answer to this is ‘yes, you can’. However, qualifying for a Buy-to-let mortgage is very much dependent on your circumstances which we will outline in the article below.

Can I remortgage my home to a buy-to-let?

It is possible to remortgage your home to a buy-to-let depending upon the circumstances as you would not be able to live in the property.

Alternatively, you may need consent to let from your existing provider.

Impacting factors on the best Buy-to-let deals

People decide to remortgage their buy-to-let property for various reasons.

Some remortgage to release equity to put towards a deposit on a different property, some remortgage to make home improvements and others remortgage to get a better interest rate.

Your eligibility to remortgage will be dependent on your reasons to do so, the equity in your property may have an impact on rates available to you.

Before a lender will accept your application, they will look at the specific reason for the remortgage before deciding if they will lend to you or not, and if so, how much they are willing to lend you.

To discuss any of the options mentioned below, please get in contact with one of our specialist advisers. We can talk you through the best option for you.

Make an enquiry for a no-obligation chat with one of our remortgage specialists.

Remortgaging for a Deposit

Buy-to-let remortgaging is useful if you are trying to release equity in order to cover a deposit on another property.

This is common amongst landlords who are trying to increase their property portfolio.

If you have many Buy-to-let mortgages, the lender will examine your entire portfolio to ensure that when it comes to borrowing, you are not overstretched.

Where the lease revenue is not enough, the maximum available loan may be reduced to suit the calculation.

Some lenders, however, enable you to supplement the achievable rental revenue with your own personal income.

Remortgage for Debt Consolidation

Some lenders will consider remortgage applications for debt consolidation but due to the increased risk involved, quite often the amount they are willing to lend is limited.

Typically, a remortgage to clear unsecured debts is typically offered at poor rates than those used for other purposes.

However, in many cases, this can still be advantageous, especially if the interest rate is lower than the interest on your debts and monthly repayments.

Improving your Interest Rate

Similar to a residential mortgage, improving your repayment terms is a sufficient reason to seek a remortgage. At Mortgageable, we can help you find the best deals on offer for your circumstances.

Converting your buy-to-let to a residence

It’s relatively common for buy-to-let owners to eventually want to move and live in the property they rent, in which case you will need to convert from a BtL mortgage into a residential mortgage.

You have the option to do this via your current lender or seek out a better deal with a new lender.

Changing from a buy-to-let mortgage to a residential mortgage will result in fees, so if you only require somewhere to live for a short period of time, it may be worth seeking a property to rent short term instead.

Factors that will affect your buy-to-let remortgage

Your personal income and buy-to-let remortgages

As with a standard mortgage, lenders may take your personal income into consideration when applying for a buy-to-let remortgage. It is important for the lender to look at your income and assess it against the buy-to-let remortgage criteria. They will use this analysis to decide upon how much they are willing to lend you.

Some lenders have a minimum income requirement that must be met but the level of the requirement is subject to the lender. Some are less than others.

Typically, lenders will consider the following aspects of your personal income when considering your application:

Basic Income (Wage)
Benefits you are in receipt of
Bonuses or Commissions
Investments that you may have elsewhere
Dividends

Issues you may face when remortgaging for a buy-to-let property

As with any financial decisions, make sure you do your research before jumping at the first deal you see.

There are a few disadvantages to remortgaging.

Fees can be incurred for switching to a new mortgage which can end up costing you more money than you had anticipated.

You may incur an early repayment settlement fee with your existing lender if you are tied into a rate and pay the mortgage off. Again, this can be an added cost that you perhaps were not expecting.

You can see why it is important that you check through all the conditions on your current mortgage and find out in advance exactly what fees/costs you will incur if you remortgage.

The equity in your property will also determine what monies you could borrow.

Need more information? Read our related quick help guides:

I have a poor credit history; can I apply for a buy-to-let mortgage?

Arranging a buy-to-let remortgage for customers with bad credit can be difficult. Below are a few of the issues that may make obtaining a buy-to-let remortgage harder:

Poor credit score
History of mortgage arrears
CCJs (County Court Judgments) IVAs (Individual Voluntary Arrangements) and DMPs (Debt Management Plans)
Bankruptcy
Previous Repossession
Defaults

If you feel any of the issues outlined above may affect your application for a buy-to-let remortgage, then do not hesitate in contacting one of our expert advisers to discuss your circumstances.

All of our advisors are professionally trained and have the expertise to answer any questions you may have about the buy-to-let remortgage process.

Will the type of property I am purchasing affect the buy-to-let mortgage deal I will get?

Most lenders prefer to deal with the ‘standard’ bricks and mortar houses with a slate roof.

The reason being, deviations from this can have a higher risk for the lender, however, there are lenders that will consider non-standard construction.

Below is a non-exhaustive list of properties deemed to be outside of the ‘standard’ construction:

Properties with a thatched roof
High rise flats
Properties with Stone or Felted roofs
Timber-framed homes

Buy-to-let remortgage rates and how to get the best deal

The list of remortgages available on the market is extensive but the level of interest you will pay is very much dependent on the lender and your personal and financial circumstances.

Those with a good credit history will quite often qualify for a better rate than those with a poor history. Deposit/Equity also has a lot to do with the rate you will get.

So, those with more deposit may end up with a lower rate buy-to-let remortgage deal.

Again, the same applies to the amount of equity you have.

It is important to note here that there are fees that come with the set up of a new mortgage and a lower rate doesn’t always mean that you are getting the best deal.

It is important to look at the cost of the buy-to-let remortgage overall before accepting any deal.

To discuss rates, fees and eligibility, contact one of our specialist advisers who are on hand to help you get the best deal available to suit your needs.

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Buy to Let Mortgage Bad Credit

by Kristian DerrickPosted on 13th August 2019 | Updated 20th January 2023

You will be pleased to hear that there are a growing number of mortgage lenders offering Buy to Let mortgages for customers with bad credit.

However, various credit issues can affect your chances of obtaining a Buy to Let mortgage at the application stage.

We will delve into these factors below in more detail so that you are better informed as to what might hinder (or help) your chances of getting the mortgage you want.

What is a buy to let mortgage with bad credit?

A buy to let mortgage with bad credit is a mortgage provided to individuals with bad credit, enabling them to purchase property to rent.

Typically, a normal buy to let mortgage is not appropriate for individuals with bad credit.

For this reason, there are buy to let mortgage providers who cater specifically to those with poor credit.

You can potentially secure a buy to let mortgage with any of the following poor credit scenarios:

Late payments.
Defaults.
Mortgage arrears.
CCJs.
Debt Management Plan (DMP).
IVA.
Bankruptcy.
Repossession.
Use of payday loans.
Low credit score.

Buy to let mortgage lenders for bad credit

Not all lenders process mortgage applications in the same way and their requirements can differ.

If you have bad credit, then it’s true that many lenders will likely not accept your application, but there are potentially many that will.

Typically you can place lenders into two main categories, these are:

Mainstream (high street) lenders.
Specialist lenders (like those that specialise in individuals with poor credit).

The reality is that poor credit can result from a variety of different things and so there is no blanket approach.

Lenders will look at a range of factors including how long ago the adverse credit occurred and how severe it was.

If it was a considerable time ago, then it’s possible that the lender will not take it into account.

Speak to one of our buy to let mortgage experts

High Street vs. Specialist Lenders

High street lenders market their products to people with no credit issues and their advisers are typically only trained and knowledge when discussing their own specific deals.

Therefore, not only are you potentially missing out on thousands of other deals offered from other providers, but they are unlikely to be able to deal with applicants with bad credit.

Not only that but if you approach a traditional high street lender and you have poor credit, you risk being declined, which could have a negative impact on your credit score.

This has the potential to make future applications more difficult.

Why choose a specialist lender?

Lenders that specialise in bad credit are a much more likely source to secure a buy to let mortgage if you have adverse credit.

Typically, specialist lenders will charge higher interest rates and require a larger deposit, but it ultimately all depends on the type of adverse credit issues you have accrued.

Many specialist lenders require you to apply through a mortgage adviser, which can be beneficial since they can often present you with a range of different deals, allowing you to choose the best offer.

Discovering a lender right for your situation will be determined by your financial history and current circumstances.

If you still have further questions or would like assistance, contact or of mortgage brokers today.

How does bad credit impact a buy to let mortgage?

Firstly, it is important to note that your credit score is different from your credit history.

Credit history as the name suggests is a record of your past financial conduct and is usually tracked over six years.

Whereas, a credit score is used by credit reference agencies and is based on specific criteria.

If a lender uses your credit score to assess your application, they will take into consideration factors such as income, age, location and credit behaviours.

Therefore, depending on the criteria the lender is looking for, you may well end up with a good lender score, despite having a poor credit score.

If your credit score is low, you will likely find it more difficult to obtain competitive rates but don’t let that put you off applying.

There are still many options available for Buy to Let mortgages for borrowers with a bad credit score.

Need more information? Read our related quick help guides:

Another impacting factor is the number of credit applications or ‘hits’ there are on your financial record.

Having a substantial number of credit applications against your name can be damaging to your credit score.

Lenders may question why you have so many credit applications on your record and this may raise a concern.

The information that a lender sees when you make a credit application, can be viewed using one of the credit reference agencies available online e.g. Equifax and Experian.

This information can be helpful to you in understanding your credit score.

It may be worth signing up to both agencies as they may not always hold the same information about you.

Remember, that accessing your credit file will not impact your score in any way and can be viewed as many times as you want.

Our expert mortgage specialists are available to help you with any questions you may have about your application.

Speak to one of our buy to let mortgage experts

Mortgage Arrears

When a missed mortgage payment is not paid and a month or more has passed, it is considered as being in arrears.

Just like missed payments on any secured loan, mortgage arrears are taken very seriously by lenders when making their decision on a mortgage application. Mortgage arrears on Buy to Let properties are viewed in the same way.

If the arrears have lasted over a month, it raises a red flag that perhaps there is an issue with repaying loans. This, in turn, has an adverse effect on an applicant’s reliability at the time the mortgage application is made.

In today’s market, it is very common to encounter landlords who have various mortgages for more than one property and for several reasons, they fall into arrears on of the mortgages.

The most common reason for this is down to the property not being let for a significant amount of time.

Therefore, for customers searching for a Buy to Let mortgage with arrears, there are a number of options available to you.

The timing of any such arrears is important. If arrears have been very recent, this is more likely to work against you than if you had arrears a few years ago.

In an application, it is always essential to clarify any mitigating circumstances to give the lender a complete image of why you fell into arrears.

If you paid off the arrears rapidly, it is worth disclosing these documents to demonstrate that you have been able to resolve the case and have done so in a timely manner.

Late Payments

It is not uncommon for people to have missed a payment during their lifetime.

Some lenders operate a zero-tolerance policy too late payments and will decline the mortgage applications based on this whereas others may take a more sympathetic view if the late payments were isolated and occurred a long time ago.

However, one thing that you can be sure of is that a lender will always look at how many late payment records exist on your credit file and how long ago they occurred. This information is imperative to the lender’s decision when considering your Buy to Let mortgage application.

Typically, the fewer late payments recorded on your file, the more access you will have to lenders and better, more competitive rates.

At this point, it is worth mentioning that late payments and arrears are two separate entities. Missed payments are often recorded at the end of a month.

This can help buy some time to settle the payment before it is considered as late.

For example, if your payment was due at the beginning of the month and you paid it in the second or third week, the payment may not be reported to the credit agencies as being late.

Missed or late payments on secured credit such as mortgages are more of an issue to those made on unsecured credit such as phone bills or credit cards.

Speak to one of our buy to let mortgage experts

Defaults

Defaults in the loan file of a borrower are one of Buy to Let’s most popular reasons for bad credit history mortgages, particularly as they remain on your record for six years.

A default notice is a formal letter sent when a certain number of payments on a loan contract have been missed.

At this point, default is generally recorded when a borrower has missed more than three payments.

The good news is that there are more Buy to Let bad credit mortgages for defaulting borrowers than in the past, so it’s possible to find a suitable Buy to Let mortgage with default.

If you have defaulted on payments against a secured loan in the past and are searching for a Buy to Let mortgage, the number of choices available to you will depend on a number of factors, such as how many defaults you have, how late they were recorded and how much they were for.

Lenders will also examine whether the defaults have been paid off, which in financial terms is known as satisfied. Other factors such as the amount of deposit you have available will also be taken into consideration.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

CCJs

Just like defaults, there is an increasing number of lenders that will consider providing a Buy to Let mortgage to someone with CCJs registered against their name.

Each lender has its own criteria, but the principal considerations that the lenders will scrutinise are, the value of CCJs, how many you have when they were recorded and if the debt has been satisfied.

In particular, the County Court Judgment date plays a significant role in determining an application’s result.

For instance, if the judgment was registered over two years ago, you are likely to have more options than if the judgment has been registered within the past year.

With that being said, some lenders will consider prospective customers who have had a CCJ registered in their name as recent as within the last few months. Read our full guide on mortgages with a CCJ for more information.

Can I get a Buy to Let mortgage if I’m in a debt management plan?

If you are presently performing debt management or have been in a debt management plan recently, it may be possible for you to get a Buy to Let mortgage.

Contact our specialist mortgage advisors, who are on hand to advise you accordingly if you have any queries about obtaining a Buy to Let mortgage if you are in or have been in a Debt Management Plan.

Can I get a Buy to Let mortgage with IVA?

If you have a current IVA, then you are likely to find it difficult to secure a buy to let mortgage.

But there are still potential ways to secure a mortgage, our mortgage brokers will be able to assist you further.

Lenders will likely want to assess your financial history and ensure that you have been making repayments on time.

Even though an IVA is considered a severe form of bad credit, it shows that you have been willing to take the steps necessary to repair your credit. Specialist lenders will assess your overall financial situation.

How does a low credit score impact a buy to let mortgage?

A credit score isn’t the same as poor credit. So if you have a poor credit score, this should not impact your ability to secure a buy to let mortgage too much.

Your credit file is composed of your credit history and shows your financial activity of the previous six years.

Although, some mortgage lenders may request that you disclose any credit issues that occurred before this period.

Your credit score is determined from a variety of factors, such as your address and age.

If you have moved to multiple addresses or have submitted numerous credit applications over a short period of time, it may have a negative impact on your credit score.

You can potentially have a low credit score without having any credit issues in the past.

Regardless, mortgage providers may consider applicants with a low score to be high risk.

The importance of affordability when applying for a Buy to Let mortgage

When applying for a Buy to Let mortgage with bad credit history, affordability will always be the most important factor taken into consideration by the lender.

Just like any other application for a mortgage, you will have to prove that you can afford the repayments. Buy to Let affordability is based on a combination of the property’s rental revenue and your financial circumstances.

If you have many Buy to Let mortgages, the lender may examine your entire portfolio to ensure that when it comes to borrowing, you are not overstretched.

Where the lease revenue is not enough, the maximum available loan will be reduced to suit the calculation.

Some lenders, however, enable you to supplement the achievable rental revenue with your own personal income.

How much deposit will I need for a Byt to Let Mortgage with bad credit?

Like any other mortgage, the more deposit you have available to put down, the more options you will have.

Typically, most lenders will consider up to 85% LTV for buy to let mortgages.

Start your application for a Buy to Let mortgage today

If you’re thinking of becoming a landlord or want to switch to a better deal with your current Buy to Let mortgage, contact our expert mortgage advisors today to discuss your options and begin your application.

Start your buy to let mortgage application

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Requirements for Buy To Let Mortgages UK

by Kristian DerrickPosted on 2nd April 2019 | Updated 20th January 2023

What is a Buy to Let Mortgage?

Before we go into eligibility criteria, required deposits etc. first you should know what a buy to let mortgage is, to see if it something that is attractive to you and your circumstances.

Well, a buy to let mortgage is just as it sounds – it is a mortgage that allows you to buy a property and rent it out and potentially build a portfolio of properties.

Most lenders will offer this type of mortgage, but it is likely that interest rates and fees will be higher than a traditional mortgage as they are considered to be higher risk.

Similar to the residential mortgage when it comes to the legal stuff, the buy to let mortgage are most often agreed upon on an interest-only basis, with the rental income being used to make the mortgage payments.

However, buy to let mortgages often have different eligibility criteria and will take into account if the investment is viable.

The amount that can be generated from renting the property will be a key factor, as it should be able to cover the monthly mortgage payments by 125%.

For example, if your mortgage payments are £500 a month, your rental income will have to be £625 a month. Some lenders have other calculations.

Eligibility Criteria for a Buy to Let Mortgage

If you think a buy to let mortgage might suit your needs, then you really need to know the eligibility criteria and make sure you tick all the right boxes before applying.

Your lender will take the following into consideration:

Credit History

A poor or limited credit history does not necessarily rule you out of a buy to let mortgage. Yes, it is true that many vendors are not keen to lend to those with a poor or no credit history, CCJs, IVAs, or a history of late payments.

However, there are specialist lenders out there that are willing to lend to those with a bad credit rating.

They may require a larger deposit and assurances that you can make the monthly payments, but they will do their best to find the deal that fits in with your circumstances.

Affordability and Income

For a buy to let mortgage, your lender may have a minimum income requirement for the buyer, particularly if you are becoming a landlord for the first time.

The usual income requirement for most lenders is £25,000, but there are lenders that will accept a lower personal income.

Furthermore, you may be able to find a lender that will have no income requirements, going on the rental potential of the property alone. This is as long as you can gain monthly payments that are 125% of the monthly mortgage payments.

Your income type may also be taken into consideration. It is not to say that you won’t be able to get a deal if you are a contractor, self-employed, or receiving a pension or other benefits. Those who are self-employed are usually expected to provide 2-3 years’ worth of accounts or tax returns, and a few months of bank statements.

Additionally, if a part of your monthly or yearly income comes from the likes of commission, bonuses, or benefits, you may need to search out a specialist lender that will take these supplements to an income into an account when making a decision.

Finally, a mortgage advisor will often make an assessment of your outgoings to show the disposable income you have at the end of each month.

If you have a large number of outgoings or existing loans (such as a lease on a car), your lender may implement a cap on how much you can borrow.

Deposit

Buy to let mortgages tend to require larger deposits than a standard residential mortgage. Whereas is not unusual to get a residential mortgage with just a 5% deposit, for a buy to let mortgage you may need as much as 25% deposit to be accepted.

However, there are some specialist lenders that will offer you 80% or 85% buy to let mortgage if certain criteria are met. Therefore, it is important to raise as large a deposit as possible, if you are considering a buy to let property.

Age

Age can be an eligibility factor with some lenders of buy to let mortgages. The minimum age for those applying for a mortgage is 18, but some lenders may have restrictions of 21 years of age or even 25 as the risk is lower. Furthermore, some mortgage providers may be unwilling to lend to applicants over a certain age, with a common age restriction being 75. However, some mortgage providers will lend to those up to 85 years of age, and some may not have any age restrictions at all.

Property Usage

Usually, lending for a single tenancy is relatively straightforward. However, it may be more complicated if your buy to let mortgage is for a holiday let, short-term let, and house with multiple occupants (HMO).

If you are planning on buying for an HMO you may need a special license and more importantly, your choice of mortgage lenders will be pretty limited. Talk with a whole of market mortgage advisor to see what deals are available to you.

Find a buy to let mortgage

Can a First Time Buyer Secure a Buy to Let Mortgage?

Yes, a first-time buyer can apply for a buy to let mortgage, but your option of lenders could be limited. Most lenders will require you to own your own residential property before agreeing to a buy to let mortgage. So, you can be a first-time landlord, if you already own a home, but for a complete first-time buyer, you will find your options for a buy to let mortgage are minimal. Speak to an experienced mortgage advisor to better understand your entire buy to let options.

Need more information? Read our related quick help guides:

Are all Properties Eligible for a Buy to Let Mortgage?

If you are looking to secure a buy to let mortgage, your lender will want to know that your chosen property is suitable for renting out.

The final decision will come down to the specifics of the property, such as its condition (if you plan on any renovations before renting), its location, and the rental market in the area.

However, most mortgage providers will have restrictions on the buy to let properties they will lend on. These include:

Ex-Local Authority Flats – Securing a mortgage will depend on the location of the property and the number of privately owned flats in the block.
New Build Flats – Usually vendors will require a larger deposit for a new build flat, although this can be dependent on area.
Flats Above Commercial Properties – Such as flats or maisonettes above restaurants. Cafes, shops or offices may have lender restrictions.
High Rise Flats – Lenders often put restrictions on the number of floors in a block of flats.
Holiday Homes – You lender will want to know that your holiday home can generate a sufficient income to cover the mortgage costs all year round.

Our expert mortgage advisors will be able to go into detail with you the types of property which are best suited for buy to let mortgages and where you will be able to get the best deal.

Main Takeaways

A buy to let mortgage is for those looking to buy a property with the intention of renting it out.
You will usually need a bigger deposit for a buy to let mortgage than a standard residential mortgage.
Many lenders will have income requirements that a buyer will have to meet.
Most mortgage providers will want to know that your chosen property can achieve a monthly rental income that is 125% above the mortgage payments.
First-time buyers can secure a buy to let mortgage, but options are limited.
Speak to our expert whole of market mortgage advisors who can discuss all your buy to let mortgage options and find the best deal for you.

Find a buy to let mortgage

Call us today on 03330 90 60 30 or contact us. One of our advisors can talk through all of your options with you.

Different Types of Mortgages UK

by Kristian DerrickPosted on 27th March 2019 | Updated 20th January 2023

The world of mortgages can be a difficult one to navigate. How do you know that you are choosing the one that best suits you and your circumstances?

A mortgage is not something you can just rush into, you really do need to weigh up your options to ensure that you are getting the best deal – it can save you thousands of pounds.

If you are a first-time buyer it can be particularly overwhelming knowing which mortgage is the one you should be looking at. But, it is important that you do your research before applying for anything to avoid a costly mistake.

The Different Types of Mortgages

You have found the house of your dreams and had your offer accepted, so now it is time to sort out that mortgage. There is a lot of jargon to navigate – fixed-rate, interest-only, tracker etc. – but you really should familiarise yourself with it all before you meet with your mortgage advisor so you know which questions to ask. Here is our guide to the different types of mortgage.

Fixed-rate Mortgage

With a fixed-rate mortgage, your monthly interest rate stays the same for the entire term of the deal, which means that your payment will be the same each month.

Fixed-rate mortgages usually run for terms between 2 and 5 years, after which you will be switched to the lenders SVR (Standard Variable Rate).

This means you should look to switch your rate or remortgage before your fixed rate ends, as your monthly payments may increase significantly if you let them go to the SVR.

The major benefit to a fixed-rate mortgage is that your rate will not rise, no matter what is happening with the market. This makes this particular mortgage a good choice for first-time buyers or those on a tighter budget who need the stability of a payment that is the same every month. On the other side, if interest rates go down, you could be paying a higher monthly payment than you would be on a variable-rate deal.

Find a fixed rate mortgage

Tracker Mortgage

For a tracker mortgage, your interest rate is dependent on the Bank of England base rate. Your payment will be the Bank of England base rate plus a further rate, 2.5% for example, and when the base rate changes, so does your payment.

Typically, a tracker mortgage will usually have a deal period once it begins, i.e lasting around two years or longer, after which you will be transferred to your providers SVR if you do not review your options. You may have the option for a ‘lifetime’ tracker mortgage, where your payments are linked to the Bank of England base rate for the entire term of the mortgage.

The major benefit of the tracker mortgage is that your monthly payments will go down if the Bank of England base rate drops (although with Brexit uncertainty, this could be unlikely).

Furthermore, your interest rate is not affected by changes in your lenders SVR, just the base rate of the Bank of England. However, with a tracker mortgage, you will never know what your payments are going to be throughout the term, which can be a little troubling if you have sudden financial troubles.

Find a tracker mortgage

Discount Mortgage

A discount mortgage can be a little more complicated for some other deals, but you can secure some lower payments at the start of your term. You will pay your lenders standard variable rate (which does not change often), with a fixed discount for a certain period of time. For example, if a lenders SVR is 3.5% and your mortgage is discounted by 1.3%, your rate would be 2.2%

It is fairly common for a discount mortgage to be ‘stepped’, which means you pay the discounted rate for part of the deal and then the higher rate for the remainder of the deal. With a discount mortgage, the good news is that your rate will be lower than the vendor’s SVR for the length of your deal, and if the SVR is low then your payments could be very affordable indeed.

However, your lender may raise their SVR at any time, which will lead to more expensive payments. Look for a discount mortgage which has an interest rate cap which it cannot go above so you can ensure your payments won’t go over a certain amount each month.

Find a discount mortgage

Standard Variable Rate (SVR) Mortgage

Every mortgage vendor has its own SVR, which is not dependent on the Bank of England base rate as they set it themselves. As the lenders set their own SVR, the rate will vary from lender to lender, so you will have to shop around to get the best deal. Furthermore, vendors can change their SVR whenever they like, which means that your payments could go up, particularly if there is word that the Bank of England base rate is set to rise.

Find a SVR mortgage

Interest-only Mortgage

With an interest-only mortgage, each month you are just paying the interest and not any of the capital. The payments will be low, but at the end of the mortgage term, you will still owe the overall balance of what you initially borrowed. With the interest-only, you will need to show that you will able to pay off the mortgage once the term is up.

Find an interest only mortgage

Repayment Mortgage

The repayment mortgage is much more common than the interest-only mortgage and is where you pay off some of the interest and some of the loan in each monthly payment. The payments will be higher than with an interest-only mortgage, but the upside is that you are building your investment in your home as the monies owed is reducing over the term.

Find a repayment mortgage

Things to Consider Before Applying for a Mortgage

Before you apply for a mortgage, try to determine which type is best suited to your situation – our expert mortgage advisors can help you with this. The type of mortgage which will be best for you will depend on whether you want to know what your mortgage payments will be every month if you would struggle if your payments were to go up, and if you suspect that your income is likely to change.

Make sure to try to ensure you are aware of the fees involved in buying a property and that your credit score meets the requirements before you apply for a mortgage.

If you want some flexibility in your payments – such as the opportunity to overpay, take payment breaks, or underpay, then ask our advisors about flexible mortgages. Overpaying usually doesn’t require a special mortgage, but often your lender will only let you overpay by a certain amount (say 10%) each year without incurring any penalties. Flexibility in a mortgage usually comes at a price, so you will have to weigh up these extra costs with the benefits.

Types of First Time Buyer Mortgages

For a more in-depth look into some common types of first time buyer mortgages, check out our following guides:

Main Takeaways

You generally have a choice between fixed-rate and variable-rate mortgages. The type which is best for you is dependent on your circumstances.
Discuss your options with a whole of market mortgage advisor, who can advise you on the best deals for your personal situation.
Have an idea in your mind of the monthly payment you can afford and use this to help determine the best mortgage for you.

If you want to overpay, underpay, or take payment breaks as your mortgage advisor or lender about any flexible options you can add to your plan

Portfolio Landlord Mortgages – UK Comparison

by Kristian DerrickPosted on 19th July 2018 | Updated 20th January 2023

In October 2017, the Prudential Regulation Authority (PRA) made some changes to the way lenders view borrowers who have four or more buy to let properties.

Part of the Bank of England, the PRA regulate around 1,500 banks, building societies, insurers, credit unions and investment firms.

Changes have been made to ensure that lenders only offer buy to let mortgages to landlords who can comfortably afford them. This means that in the future, you may need to provide your lender with additional information about your current income, outgoings, assets and liabilities when applying for a buy to let mortgage.

So, whether you’re a first-time landlord looking to grow your portfolio, or you’re a seasoned buy to let investor, now’s the time to familiarise yourself with the new rules and regulations.

Find a buy to let mortgage

What is a Portfolio Mortgage?

A portfolio mortgage is a type of mortgage offered to landlords with a portfolio of properties.

Portfolio mortgages are positioned in-between buy-to-let mortgages and commercial mortgages. They’re typically interest-only like normal buy-to-let mortgages because they’re still for buy-to-let properties.

What is a Portfolio Landlord?

If you own four or more mortgaged buy to let properties, lenders will class you as a portfolio landlord.

If you own less than four properties classified as a private landlord and only require a normal buy-to-let mortgages or limited company buy-to-let mortgages.

Always remember that lenders only take into account the number of properties you own. This means that if you have four or more rental properties, or if a new purchase will be your fourth one, mortgage lenders will still class you as a portfolio landlord.

What can a portfolio mortgage be used for?

Portfolio mortgages can be used to finance the following:

Normal buy-to-let properties
Limited company buy-to-lets – this would require a limited company portfolio mortgage
Auction properties
Student buy-to-lets
Multiple flats under one freehold
HMO (Houses in Multiple Occupation) – HMO mortgages are available as a standalone mortgage product if you don’t have a portfolio of 4 or properties
Properties owned via a limited company.
Consent to let properties.
Holiday lets.
All buy to let mortgages owned either solely or jointly.

How does a portfolio landlord mortgage work?

A landlord mortgage, portfolio mortgage or buy-to-let mortgage works identically to a regular mortgage, that means:

It is interest-only.
Secured on rental properties.
On a one mortgage per property basis – not one mortgage for the entire portfolio.

This means that you will require a portfolio mortgage after you have acquired four properties and for every new property you acquire after the fourth.

What if you already have a buy-to-let mortgage?

If you have an existing buy-to-let mortgage, you have the option of remortgaging them onto a variety of portfolio products, however, this isn’t required unless your introductory period was due to end and didn’t want to be transferred to your lenders Standard Variable Rate (SVR).

The reality is that you can have from four to many additional properties with portfolio mortgages.

What differences are there for portfolio landlords?

When applying for a mortgage, you may need to provide extra information to your lender than you did before. This might include your current property portfolio and experience, as well as your assets and liabilities. Lenders may also want to see a business plan and cash flow statements for the properties you own.

Lenders will want to assess your personal income and expenditure including tax liability, living costs and essential expenses, as well as any other financial or credit commitments that you may have. In some cases, the process is now quite similar to a residential mortgage application.

It’s important to remember that lenders will also evaluate your rental income, especially if it is used as part of your personal income. Rental income is usually validated by comparing typical rents in the area, as well as local demand. Future rental income will be checked, too.

What is an Interest Coverage Ratio (ICR)?

Lenders work out ICR as a ratio of your expected monthly rental income from a buy to let property to the monthly interest payments, taking into account any likely future increases in interest rates.

This ratio is used to assess the debt you intend to take on. Lenders want to work out how easily you’ll be able to pay it back using the rental income from your new property alone. If it won’t bring in enough income, your lender won’t grant you a buy to let portfolio mortgage on rental income alone.

However, it is also possible to apply to use your personal income, as well as your potential rental income when taking out a new buy to let mortgage. This will be considered in circumstances where there is a shortfall in the required rental income received from your buy to let property to meet the minimum ICR rate.

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Portfolio mortgages frequently asked questions

What’s the difference between a professional landlord and a portfolio landlord?

Typically, an individual that has a full time job or earns the majority of their income outside of their rental properties are referred to as “amateur landlords”.

Landlords that have four or more properties and generate the majority of their income via their buy-to-let properties are referred to as “professional landlords” and often have a portfolio mortgage product.

What is the best mortgage for a landlord?

If you are landlord with up to 3 properties then you’ll need regular buy-to-let mortgages, often these are acquired via a limited company since there are certain tax advantages.
If you own more than 4 buy-to-let properties then you will need a portfolio mortgage when you purchase any further properties and/or when you remortgage your existing ones.
At the point your borrowing exceeds the limits determined by your lender, then you will have to consider a commercial mortgage.

How many landlord mortgages can you have at the same time?

In theory, it’s possible to have between four to almost any number of portfolio mortgages beyond that. Of course, lenders will set their own requirements with regards to lending limits and how many mortgages you can hold with them. If you do exceed these borrowing limits and you want to acquire further but-to-let mortgages, it’s usually advised that you look into commercial mortgages.

If you are considering a commercial mortgage, then you may want to think about remortgaging all of your current buy-to-let/portfolio mortgages onto a single commercial mortgage.

Got a few questions about buy to let portfolio mortgages?

The new rules around buy to let mortgages can be difficult to get your head around at first, but you’ll feel much more confident once you’re in the know.

Planning on applying for a new buy to let mortgage in the near future? Talk to us if you’d like to know what you need to have in place.

If you have any questions about but to let portfolio mortgages, Call us today on 01925 906210. One of our advisors can talk through all of your options with you.