What is a Buy to Let mortgage?
This is a type of mortgage for people who are buying property explicitly to rent them out. They are generally more expensive than normal mortgages.
Can I get one?
Buy to Let mortgages are only for people who are investing in property. This is a risky business! Buy to Let mortgages are very hard to qualify for if you do not own your own home. You will need to have a good credit record and your existing mortgage repayments and bills must not leave you too stretched each month. Mortgage lenders will have their own criteria when it comes to the ages of the mortgage applicants and will generally not lend if you will be between 70 and 75 when the mortgage is due to be completed.
How is a Buy to Let mortgage different from other mortgages?
- Buy to Let interest rates are generally higher
- Lenders will often require higher deposits for Buy to Let mortgages than regular ones. The minimum deposit for a buy-to-let mortgage is usually a minimum of 25%, while some require 40%.
- Much higher fees
How much can I borrow with a Buy to Let mortgage?
Unlike a mortgage for a house you will live in yourself, the amount you can borrow with a Buy to Let mortgage will depend on the rental value of the property. Most lenders will require the rental income to be a quarter to a third higher than your mortgage payment. If you are not sure about the rental value of the property you are looking to buy with a Buy to Let mortgage, local letting agents are the best source of information.
Who provides Buy to Let mortgages?
The majority of the major bank brands offer Buy to Let mortgages and there are specialist lenders who only offer these types of mortgage. A mortgage broker is a great source of information when you are looking for any type of mortgage as they are specialists and will help you to choose the best deal for your situation.
What about comparison websites?
As with everything ‘money’ these days, comparison websites are a great starting point for anyone trying to find a mortgage. They will give you ideas of figures and lenders who will potentially offer you a mortgage. It is worth remembering that these comparison websites will all give you different results. It’s a good idea to have a look at more than one of them before choosing a lender to go with. As with all mortgages, make sure you look at the exact product details, and that you really understand what you are getting for your money.
Will I pay tax on my Buy to Let property?
Basically, if you sell your Buy to Let property and make a profit, you will be liable to pay Capital Gains Tax if your profit is more than the annual threshold.
You also need to bare in mind that if your property is achieving a rental income that is above your mortgage payments, you may be require to pay Income Tax.