Buy To Let Morgage
What is a buy to let mortgage?
A buy to let mortgage is a loan for landlords secured against a property, just like a residential mortgage. The difference however is that it’s secured against a property that you will not live in, but will rent out.
How is a buy to let mortgage different to a residential mortgage?
The primary difference between the two is how they are underwritten. A residential mortgage is paid monthly using your normal household income. A buy to let mortgage is paid monthly using the rental income of the property. As such, one of the primary considerations when a lender receives a buy to let mortgage application, is how much rent the property would achieve, and how easy it would be to rent out. Your own personal income isn’t as important.
How much can I borrow with a buy to let mortgage?
The amount you can borrow is normally directly related how much the property would rent out for. Usually the more rent received per month, the more you can borrow on a buy to let mortgage.
Figures vary between lenders so the best way to find out exactly how much can be borrowed is to get in touch with one of our specialist advisors who can look at the numbers, and give you a definite answer, as well as identify the lender who’ll offer you the best deal.
What is a limited company buy to let mortgage?
It’s where you acquire a buy to let mortgage exactly as you normally would, but the property and the mortgage used to purchase it are in the name of a limited company rather than one or more personal names.
What difference does it make having a limited company buy to let mortgage?
The main difference is the tax treatment of the rental income. Particularly for those on higher incomes, it can be more tax efficient to own a buy to let property in a limited company. It’s important to note that this isn’t a guarantee and advice should be sought from a suitably qualified tax professional to identify if this would be the right option for you.
What rate differences are between limited company buy to let mortgages and personal name?
With the majority of lenders, none. Whether you opt to own the property in a limited company name or your personal name, most lenders and products offer the exact same rates either way.
What differences are there in the mortgage process?
Very few. The company must be showing on Companies House, the direct debit must be set up and paid from an account in the company name, and directors/shareholders will normally be required to provide personal guarantees.
What is a SPV?
SPV stands for “Special Purpose Vehicle” and is a limited company set up exclusively for the purpose of letting out property. Many lenders will only consider lending to SPV’s as if the company performs other business activities which don’t work out, it puts at risk the property against which they have their mortgage secured.
For a limited company to be classed as a SPV, it must have only one/some/all of these SIC codes on Companies House.
- 68100 – BUYING AND SELLING OF OWN REAL ESTATE
- 68209 – OTHER LETTING AND OPERATING OF OWN OR LEASED REAL ESTATE
- 68201 – RENTING AND OPERATING OF HOUSING ASSOCIATION REAL ESTATE
- 68320 – MANAGEMENT OF REAL ESTATE
What interest rate differences are there between a personal and limited company buy to let mortgage?
None. The vast majority of lenders who offer such mortgages charge the same rates & fees either way.
How much deposit is required?
Most lenders will require between 20%-25% deposit. Some lenders may consider as little as 15%.
There are many things which can influence how much exact deposit you will need including;
- Property type
- Property location
- Landlord experience
- Portfolio size
- Tenant type
- Tenancy type
Can I get a limited company buy to let mortgage for a HMO?
Yes. In fact, the majority of landlords we’ve worked with who own HMO (House of Multiple Occupancy) properties, do so through a limited company.
A HMO is where the property will usually be let out bedroom by bedroom individually to unrelated tenants, rather than as a whole property. This arrangement is particularly popular with students going to university as the rent individually normally includes bills, and can be quite cheap.
On paper, rental income from a HMO can be higher, however there are increased risks too. Such as the chance of one of more rooms being empty is higher.
What is a corporate let mortgage?
A corporate let mortgage, is where a property is going to be let out to another company who will in turn, provide accommodation for others. For example, a large hospital looking to provide accommodation for it’s staff, or a university looking to provide accommodation for it’s students.
These tenancy agreements with the 3rd party companies tend to be longer, over several years. And the who will eventually be living there will significantly influence who will lend and in turn, the rates available. For example, you will have more options and better rates if you’ll be letting to the NHS providing accommodation for some nurses. You’ll have less options if you’ll be letting to a charity to providing accommodation for homeless people or asylum seekers (basically, anyone it’d look bad for the lender to evict if they had to repossess the property).
How do I know if a limited company buy to let mortgage is right for me?
That is where our specialists come in!
There’s no right or wrong, or one-size-fits-all with these mortgages, so getting the right advice is crucial, and getting it wrong can be an expensive mistake.
With our combined experience of hundreds, if not thousands, of limited company buy to let mortgages over the years, we know exactly what we’re doing with them and can ensure that you get the right advice, and the most suitable mortgage for your own individual circumstances.
