Is it difficult to obtain a Buy to Let mortgage? How much deposit will I need?
No, there are plenty of lenders willing to lend on Buy to Let mortgages. You will need a deposit of at least 15%, more likely 20% or 25% of the purchase price (the bigger your deposit the wider choice of lenders).
On what basis do lenders decide to approve, and what loan amount is available, on a BTL Mortgage?
Unlike residential mortgages, where the maximum you can borrow is usually a multiple of your income, affordability for a Buy to Let mortgage is assessed primarily from the rent the property can generate. Some Buy to Let lenders do insist on applicants having a minimum income; others don’t. The calculation generally is based on the margin by which rent exceeds the interest cost. But different lenders, and even different products with the same lender, can and do work on different calculations. A good broker such as ibmco will assess your particular situation and advise which lender(s) will provide the loan amount you require, as well as taking into account other factors such as the property type and location.
Is there an upper age limit for applicants for a Buy to Let mortgage?
Many lenders do require the mortgage to be repaid by a certain age – 75, 80 or 85 are all common maximum ages – which combined with the minimum mortgage term does put a limit on the age at which you can apply. But there are some lenders which do not have an upper age limit. Property investment is often seen as a lifetime occupation providing income into old age and a good broker can advise what continuing mortgage/remortgage opportunities there are. Ideally, unless you are planning to sell your properties, you should secure long term finance for your property portfolio before you are too old to do so (for example currently mortgage terms of up to 35 years are possible for applicants up to age 80). Please consult ibmco.
Can a first time buyer apply for a Buy to Let mortgage?
A Buy to Let mortgage is a mortgage for a property to be used specifically for renting out. Lenders don’t want a Buy to Let mortgage to be used as a ‘back door’ to obtaining a residential mortgage. Therefore if a first time buyer applies for a BTL mortgage they will apply the residential income multiplier rules as well as the BTL criteria. Once you have an investment property – although you may still not be a homeowner – you are no longer a first time buyer so the process becomes easier.
Is there a limit on how many Buy to Let mortgages I can have?
No. There probably will be a limit on how many mortgages or how much money you can borrow from one lender. So, as your property portfolio grows you will need to spread the mortgages between different lenders. Some lenders though specify that they will not lend to applicants having more than a certain number of properties. ibmco can guide you through the expansion of your portfolio.
What is an HMO?
An HMO (House in Multiple Occupation) is a house let to multiple, unrelated tenants who have their own rooms but share some facilities e.g. kitchen, bathroom. The tenants can all sign one joint tenancy (common with students) or each have their own separate assured shorthold tenancy. Some HMOs require licensing by the local authority and are subject to rules which put responsibilities on landlords. But this type of property can often generate a higher rental yield. A Buy to Let mortgage for an HMO requires a specialized lender and ibmco can help to finance this type of property. Please see our post on HMOs (in the News section of the website, enter HMO in the search box).
Can I obtain a Buy to Let Mortgage in a Limited Company Name?
Yes. ibmco arranges Buy to Let mortgages for companies. Please see the post on Limited Companies (in the News section of the website, enter Limited Company in the search box).
Can I obtain a Buy to Let mortgage on a property which will need some refurbishment before renting it out?
Probably not. When the surveyor appointed by the lender visits the property if he deems it unfit for letting in its present state a Buy to Let mortgage will be declined. You will need to obtain short term finance until the property is in a lettable state, then apply for a Buy to Let mortgage. (See ‘Bridging and Short Term Finance’ under the Other Types of Finance section of the website).
I plan to buy a property at auction. Can I arrange a Buy to Let Mortgage to purchase it?
When your bid is accepted you commit to completing the purchase, usually in 28 days. It is unlikely that you can arrange a Buy to Let mortgage in this time, and then allow time for the legal process to take place. Also a property placed in an auction is often one which requires some – at the very least – cosmetic improvement so there is a risk of an unsatisfactory survey. Some short term bridging lenders are geared up to the short timescales involved and this is very likely the best way to arrange the purchase finance. See ‘Bridging and Short Term Finance’ under the Other Types of Finance section of the website.
If you have the cash, you could of course complete the purchase for cash then obtain a Buy to Let mortgage once you own the property. ibmco can advise which lenders will remortgage a property shortly after its purchase, and ones which will take into account improved value as a result of refurbishments.
If you already own properties with equity in them, consider raising cash by remortgaging to create a ‘pot’ with which you can take advantage of buying at advantageous prices at auction or as opportunities arise.
Another way, if you can, might be to arrange a Forward Funding Facility – see the item in our News section about this.
What is Consumer Buy to Let?
Buying a property to rent it out is a business transaction and most Buy to Let mortgages are considered to be for business purposes and therefore not subject to the same regulations as residential mortgages.
Some Buy to Let mortgages are regulated mortgages though. These are where the borrower has not made a conscious decision to buy the property for business purposes and might include :
Deciding to rent out a property which the applicant has previously lived in
Renting to a family member
These are classed as Consumer Buy to Let and will be treated as regulated mortgages and it is necessary to find a lender which will accept both regulated and unregulated Buy to Let mortgages.
Is it possible to obtain a Buy to Let Mortgage for a property to be used as a Holiday Let (or Short Term Let)?
Generally a Buy to Let property is required to be let on an assured shorthold tenancy usually with a 6 or 12 month term. Clearly a Holiday Let falls outside this requirement. There are some Buy to Let lenders which will consider a holiday let purchase so this is possible but more than one holiday let in a portfolio can be problematical.
A portfolio of holiday let properties can be financed via a Commercial Mortgage if the proposal makes commercial sense.
Holiday Lets can be very profitable, and with short term lettings via websites such as Airbnb becoming more popular it remains to be seen whether this type of Buy to Let will attract more support from Buy to Let lenders in the future.
Can a Buy to Let Mortgage be arranged for someone not living in the UK?
Yes mortgages in the UK can be arranged for UK citizens living abroad (ex-pats) but the choice of lenders is narrower and the criteria may be tighter. Please enquire.
Can a Buy to Let Mortgage be arranged for a block of flats?
Can a Buy to Let Mortgaged be arranged for a semi-commercial property?
A semi commercial property – for example a shop with a flat above on a single freehold title – can be financed by way of a Commercial Mortgage. But there may be advantages in terms of stamp duty on purchase and the tax relief restrictions applied to residential Buy to Lets.
A flat above a shop or above commercial property – on its own separate long leasehold title – can be financed on Buy to Let mortgage. Be aware though that the lender will probably take a poor view of the flat if the commercial property below creates noise or smells or is open all hours. Such flats can very likely be financed but at lower loan to values and on less favourable terms.
Can I raise 100% of the purchase price of a Buy to Let property by remortgaging an existing property to raise the deposit and the remainder by way of a Buy to Let mortgage on the purchase?
Yes. Raising the deposit in this way is acceptable.