Buy To Let

• First Time Buyers – most lenders will want to see that you have or do own your own home before being prepared to lend to you on a rental property

   

• First Time Landlords – even if you do own your own home, many lenders will be stricter when lending to those with no experience of being a Landlord

   

• Consumer Buy to Let – if you have previously lived in the property or have inherited it and wish to rent it out, many lenders will consider you an accidental Landlord. Meaning the way your application is dealt with is treated differently to that of an ordinary BTL Mortgage.

   

• House of Multiple Occupation (HMO) – each lender defines this differently, but essentially if 3 or more non-relatives will be renting your property, there is a good chance the lender will define this as an HMO. Not every lender will Mortgage HMO’s and when they do, they will tend to charge a higher rate of interest and criteria will be stricter on things such as First Time Landlords.

   

•  80% Loan to Value or more (20% deposit) – the average deposit lenders require for BTL Mortgages tend to be 25%. So if you have less than this, not every lender is going to be available to you.

• Limited Company BTL’s – Rental properties which are owned and Mortgaged in the name of a Limited Company – usually for tax purposes.

• Adverse Credit BTL’s – Tends to be trickier obtaining a BTL Mortgage when you have previous Bad Credit, but there are still options

The above cases are all niches that not every lender will be prepared to lend on. Our Mortgage Advisors Specialise in the above, so if you require individual advice, please get in touch via our short contact form.

If you require more general information on the above points, we delve into this in further detail below.

This will be acceptable to most lenders up to 75%-80% loan to value. With two Specialist lenders only requiring a 15% deposit.

However, if you are looking at renting out a property that will be tenanted to 3 or more individuals that are not family members. The property then might fall into a category known as a House of Multiple Occupation. Which would be unacceptable to a lot of lenders. So this is something worth considering and speaking to a Specialist Mortgage Advisor about, before getting too far into the process.

Lenders each have their own rules as to what they consider an HMO to be. Most Specialist Lenders will consider an HMO to be a property rented out to 3 or more individuals that are not family members. But many mainstream lenders will classify a HMO as a property occupied by 5 or more tenants.

The key difference between an ordinary rental property and an HMO, is the lenders criteria tends to be slightly stricter for HMO’s, such as the Interest Cover Ratio (mentioned above) tends to be harsher. A larger deposit is often sought, and Lenders Interest rates and fees will often be more expensive.

Most lenders will require a 25% deposit; however some will allow a 20% deposit and one Specialist Lender will allow just a 15% deposit.
If you’re a First time landlord, options will be limited to just a handful of lenders. However, one mainstream lender will potentially allow you to purchase a HMO that will contain 4 individual tenants. Providing they are all under one tenancy agreement and have a 25% deposit.

Mortgage Lenders generally, require a 25% Deposit on BTL Mortgages. However, in the last couple of years, as lenders compete for your business, they have begun to slowly decrease the required deposit to 20%. With three lenders decreasing this to 15%.

Again, the reason lenders require a larger deposit is down to risk. Rental properties are riskier to lend on than Residential Properties, as Lenders find you are much more likely to want to repay the Mortgage on your own home, should you get into financial difficulty, than you would on an Investment property.

• For individuals, the amount of tax relief you can claim on your income has been cut back. These changes do not affect Limited Companies.
• When reinvesting your Profits back into your Property Portfolio, no income tax will be payable, just corporation tax. This includes renovating your existing portfolio or purchasing additional properties.
• You can release £5,000 in dividends from your Limited Company, tax free. As this will be your dividend tax free allowance
• The tax you pay will be lower if you are a higher rate tax payer, or your portfolio income will throw you into this band. Corporation Tax will be 18% by 2020 on your profits, where as Income tax is 40%, on higher earners.

• Interest rates and fees tend to be more expensive 
• The number of lenders prepared to lend to you, will be reduced and consist of mainly Specialist Mortgage Lenders.
• Individuals selling property have a Capital Gains Tax allowance of £12,000. Limited Companies do not have this allowance on the profit they make on the sale of their Buy to Lets.
• Higher Admin costs; costs will be higher on essential things such as Legal and Accounting Costs

You should always speak to an Accountant and a Mortgage Advisor which specialises in Ltd Co BTL’s before deciding that this will be the right option for you and your portfolio.