BUY TO LET MORTGAGES

What is a buy-to-let mortgage?

A buy to let mortgage is a mortgage sold specifically for those who buy property as an investment, rather than getting a mortgage for somewhere you want to live yourself. If you’re looking to purchase an extra property to rent out to others, then a buy-to-let mortgage should be all you’ll need. Mortgage lenders do not accept rented properties on a standard residential mortgage. This is because they believe there is greater risk involved with buy-to-let lending than with standard residential lending. You should be aware that buy-to-let mortgages being bought as an investment are not usually regulated by the Financial Conduct Authority (FCA). However, if you or your family plan to live in the property, it is likely to be regulated by the FCA, like a residential mortgage.

How do buy to let mortgages work?

Buy to let mortgages are a way for existing investors and new landlords to take their first steps into the rental property market. This is how it normally work:

  • Put down your deposit: The minimum deposit for a buy to let mortgage is typically higher than a standard residential mortgage. You will usually need at least a 20% deposit and a larger deposit will get you a better rate.
  • Interest-only payments: With buy-to-let mortgages, you still have the option for a capital repayment or an interest-only mortgage but mostly Landlords tend to pick an interest-only mortgage, because it reduces your monthly payments significantly, allowing you to maximise your rental earnings potential so you’ll pay the interest each month, but not the full capital amount. At the end of the mortgage term you’ll repay the capital debt. 
  • As well as the standard Stamp Duty tax you’ll need to pay, buy-to-let mortgages need to pay an extra 3% of the purchase price.
  • Your rental income usually must be at least 125%-145% of your mortgage payment – this is called your rental yield.
  • Some lenders also require a minimum income, sometimes of at least £25,000.
  • Lenders may look at the property price, some will only lend if the home is worth more than £40,000 and demand for the type of property and how many properties you own to see your track record.
  • There are often minimum age requirements of 18, with some lenders requiring you to be at least 25 to be eligible for a loan.
  • A fixed rate deal can offer you peace of mind, as you’ll know what your monthly repayments will be but there are other options available which could work out cheaper overall.
  • Be mindful of other costs associated with Buy to let mortgages such as letting agency fees, landlord insurance, maintaining your property, cleaning and redecorating your property and legal and accountancy fees.
  • A poor credit history can make it difficult to obtain a mortgage but there are some lenders that are more flexible.
  • If you rent out your residential property on a residential mortgage then you will be breaching your mortgage contract. Your mortgage lender could repossess your home or make you repay the mortgage in full.
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CROWN FINANCIAL LTD

  • Crown Financial Ltd (FCA No.959847) is an Appointed Representative of Connect IFA Ltd (FCA No. 441505) which is Authorised and Regulated by the Financial Conduct Authority  and is entered on the financial services register (https://register.fca.org.uk/) under reference 959847. The FCA does not regulate some forms of Business Buy to Let Mortgages and Commercial Mortgages to Limited Companies. The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.                               
  • Crown Financial Ltd Registered Office: 118B, Gubbins Lane, Romford, RM3 0DR. Company Registered in England and Wales Reg. 13486324. Crown Financial Ltd is registered with the Information Commissioner’s Office under registration reference: ZB243625. Copyright © 2021 All Rights Reserved.
  • A fee will be payable for arranging your mortgage with Crown Financial Ltd. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity, but this is typically 0.5% of the mortgage balance, e.g. £500 for a mortgage of £100000. Initial consultation is always free.
  • A fee of (minimum £99 – £199) is payable at the outset when you apply for the mortgage.
  • We don’t charge any fee for insurance services. 
  • Commission disclosure: We are a credit broker and not a lender. We have access to an extensive range of lenders. Once we have assessed your needs, we will recommend a lender(s) that provides suitable products to meet your personal circumstances and requirements, though you are not obliged to take our advice or recommendation. Whichever lender we introduce you to, we will typically receive commission from them after completion of the transaction. The amount of commission we receive will normally be a fixed percentage of the amount you borrow from the lender. Commission paid to us may vary in amount depending on the lender and product. The lenders we work with pay commission at different rates. However, the amount of commission that we receive from a lender does not have an effect on the amount that you pay to that lender under your credit agreement.
  • Making a Complaint: It is our intention to provide you with a high level of customer service at all times.  If there is an occasion when we do not meet these standards and you wish to register a complaint, please write to: Compliance Department; Connect IFA Ltd, 39 Station Lane, Hornchurch, RM12 6JL or call: 01708 676110. If you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service www.financial-ombudsman.org.uk
 
  • Your home may be repossessed if you do not keep up repayments on your mortgage or loans secured on it.