What is a buy to let mortgage?
A buy to let property is a type of property investment, the landlord is the investor and they let out the property for a profit. The loan secured against the property is a buy to let mortgage.
Please note: although Hello Mortgage is authorised and regulated by the Financial Conduct Authority (FCA), the FCA does not regulate most Buy to Let mortgages.
What type of landlord are you?
There is more than one type of landlord, and depending on what type you are will depend on the mortgage you can get.
If you're buying a property with the intention to let it out, your mortgage is classed as a business loan, not regulated by the Financial Conduct Authority (FCA). This is a major difference between normal residential mortgages. However, at Hello Mortgage we don't see it this way, we treat all Buy To Let mortgages as if they were fully regulated. We believe this ensures the best possible outcome for all our clients regardless if they are first time landlords or experienced portfolio investors.
Portfolio Landlord
Typically you own 4 or more properties and/or have a growing property portfolio. If you are looking to re-mortgage some or all of your portfolio we can help.
Accidental Landlord
This means you became a landlord by accident. You may have inherited a property, or moved in with your partner. Either way, it was not your intention to own a property that you are going to let out.
If this is you, your best using an experienced broker like Hello Mortgage's Buy To Let team.
Not every broker has access to the whole market when it comes to Buy To Lets, we do! As many Buy To Let mortgages are “intermediary only” you can only get them through a broker.
Do I need a buy to let mortgage for a property I want to rent out?
Absolutely. A buy to let mortgage is a special type of loan that is based on different assumptions and affordability criteria compared to a standard residential mortgage. The main difference is the way the lender reviews affordability. For example, a residential mortgage mainly assessed on your income, but a buy to let mortgage is mainly assessed on the rent generated.
However, many lenders will require you to have a minimum salary which is £20,000 or more per year.
Other key differences between a residential mortgage and a buy to let mortgage are the interest rate, deposit required and arrangement fees. Interest rates tend to be higher on buy to let mortgages, some lenders ask for a 20% minimum deposit and arrangement fees are always higher.
How much could I borrow?
As mentioned above, buy to let mortgages are mainly dependent on the properties profitability. Typically a lender will need the rental income to be at least 125% of the monthly mortgage payment, some will ask for more at least 145%.
So, at a basic level, a property with rental income of £800 per month could mean a loan amount of £132,000
Re-mortgaging your Buy-To-Let loan
As with a residential mortgage, it always pays to shop around.
Many of our clients re-mortgage their Buy To Let properties to get a better rate, raise additional capital for large refurbishments or to expand their portfolio.
If you’re looking for re-mortgage deals yourself, don’t be fooled by attractive advertising. There might be other fees, and changing interest rates will affect how much you pay over the life of your mortgage – its true cost. We can help you make sense of the options, and find the one that’s right for you.