Buy to let mortgages

There are literally thousands of mortgage products out there. And even when you’re armed with all the facts, it can be tough to find one that is right for your needs.

When you apply through Relevare, we ensure the home buying process is as stress-free as possible. Our advisor are not restricted to any particular providers and will act solely in your best interests. Therefore, you can be confident that the products recommended will be the right for your circumstances.

Once we have gathered all relevant information from you, we will search our extensive mortgage lender platform to offer you the right mortgage and protection products. We will clearly explain the products on offer and why we feel they are right for you.

Every unsuccessful mortgage application may harm your chances of success as each refusal will appear on your credit record.

Using one of our mortgage and protection advisors will maximise your chances of being accepted the first time around.

Going to your existing bank or building society means you’ll only be offered its
products, but you really want to get the compare deals from across the market.
That’s where our mortgage advisor can help.
As mortgages are such a significant transaction, getting professional
help is very advantageous.
Our advisors will source relevant products that fits your credit
history, offer an extra layer of protection if things go wrong, and carry more clout
with lenders to ease acceptance on otherwise unobtainable mortgages.

With many fantastic and market-leading rates available, our mortgage and protection advisors will listen attentively to requirements, ensuring we are on hand to get you the right mortgage to suit your situation.

Before you find your ideal home, we will:

● Check your borrowing potential
● Inform you of likely repayment figures
● Review any incentives available from lenders
● Source the lenders and available rates
● Advise what documents the lenders are likely to require

Getting a mortgage is important, but it doesn’t have to be complicated. We’ll handle every step for you, deal with all the paperwork and take away all the hassle. Here’s a quick overview of how the process works and how we will help you:

• We’ll talk to you in detail about your situation and budget to work out the maximum you can borrow. This will help make sure you’re looking for properties in the right price bracket.
• We’ll explain all the documentation we’ll need to put together to support your application.
• Once you’ve found a property, we’ll find your ideal mortgage and manage the application process for you. We’ll make it as simple as possible.
• The lender then carries out a survey to assess the property, and their underwriter will review it all to confirm it’s affordable for you. This might include asking for a reference from your employer or accountant
• Once the lender’s happy with all the checks, they’ll make a formal mortgage offer. Then we’ll help you complete the legal details and exchange contracts with the seller. We’ll be there to talk you through every single piece of paper so you don’t need to worry about a thing.

There are two main reasons for remortgaging:

• To borrow additional funds
• To get a better mortgage deal with a new lender, normally when your current deal expires

Sometimes you might want to do a combination of the two.

The benefits of shopping around

It can be very tempting to simply renew with your current lender because it might seem like the easiest option. However you could be missing out on a really competitive deal, so it’s always worth seeing what else is out there.

We can help you with everything, whether you want to borrow more from your lender, or switch to a new one. We’ll do all the analysis for you, comparing what your existing lender can offer with other deals on the market.

We’ll keep it really simple for you, streamline the whole process and offer straightforward advice on the benefits and risks of switching. For example, many lenders offer a free legal service with their remortgage deals, saving you money. However, if you need to complete quickly you may be better off selecting your own solicitor. We can help you with that.

For great advice on every aspect of remortgaging and what it means for your particular situation, just ask.

Top tip: Plan ahead

Get in touch with us around six months before your existing mortgage deal expires, or well before you need additional funds. That gives us plenty of time to find the best deal for you.

Arranging a buy-to-let (BTL) mortgage is similar to any other mortgage, and you can read details in our ‘How does the mortgage process work’ guide.

There is one key difference though, based on the fact you plan to rent the property out.

If you want a mortgage for a property you will live in, a lender will look at many factors, including your personal income and expenditure to help decide if they are happy to make you an offer.

However, with BTL the lender will also take into account how much you will be able to rent the property out for.

There are some important decisions you need to make when deciding to buy a property to let, but we can guide you smoothly through everything. It’s different for everyone, so here’s a really simple guide to work out what’s best for you:

Market, regulation and mortgages

Being a landlord can be a great way to increase your income, or to acquire a property as a longer term investment. And in order to make it as profitable as possible, it’s vital to get clear advice from a professional mortgage adviser. That’s where we can help. We know the latest UK legislation and regulation inside out and can advise you on the detail of your mortgage requirements and put you in touch with tax specialists who can guide you on the most tax efficient way of purchasing a rental property.

Being confident you can afford it

Lenders traditionally calculate how much you can borrow by looking at the property’s value and the expected rental income.

It’s standard practice to build in a buffer too. T his allows for hidden costs such as the property sometimes being empty, paying estate agency fees and spending on maintenance. It is calculated by using what’s known as the interest coverage ratio (ICR). The ICR determines the amount the lender would like the rental income to be, to cover the mortgage and other costs.

Recent regulation changes mean these calculations have got stricter. Lenders will also ‘stress‒test’ the mortgage, to make sure that an increase in interest rates won’t cause any problems and you will still make a profit. The minimum stress test rate is either 5.5%, or 2% above the actual mortgage rate ‒ whichever is higher.

Here’s an example based on a £200,000 mortgage, using a typical ICR of 145% of mortgage interest and stress testing using an interest rate of 5.5%. The minimum rent required works out at £1,329 per month.

Taking personal income into account

This is known as income top‒slicing. Some lenders will factor in your personal income if the stress-tested monthly rental calculation explained above falls short. They will look at how much you earn compared to all you spend, including your residential mortgage, household expenditure and rental property costs.

If you have extra income after covering all your outgoings, these lenders will combine it with expected rent to calculate the maximum you can borrow.

Yes, Lenders will usually want to see three years of accounts history. However, a selection of lenders will lend against your last year’s income. You may also be able to use your company’s net profit instead of using salary and dividends payments.

There are several very competitive mortgage options available if you are self-employed. Our Mortgage and protection advisors are on hand to guide you through all the available options and provide advice on the specific documents the mortgage lender may request.

If you already own 4 or more properties, or have the ambition to build your portfolio, there are now additional regulatory requirements for lenders to factor in to their assessments. The regulation is not prescriptive but some examples include the lender’s relationship with the borrower, how much experience the borrower has as a landlord and a view of the borrower’s overall property portfolio.

We have many clients who are classed as ‘portfolio landlords’ and have expertise in helping clients refinance and build their property portfolios, with strong relationships with all the key lenders in this market.

Stamp Duty Land Tax (SDLT)

SDLT is tax you pay when you buy a property. There is a standard calculation when you buy your main home, which goes up the more expensive it is. The same applies when buying further properties, but includes an additional 3% rise.

You need to pay this supplement whether it’s a second home, a new home if planning to rent out your current one (known as ‘let to buy’), or a BTL purchase, even if you’re living in rented accommodation yourself.

You can’t avoid the 3% by saying you own one property and having your spouse buy the second in their name. You and your spouse are considered to be one ‘unit’.

Income tax

You are liable to pay tax on income earned from rental property. This is income tax if it’s a personal purchase, or corporation tax if you own it through a limited company. The amount depends on rental income, mortgage interest and other tax-deductible costs.

It’s important to get professional tax advice on this before making any decisions about purchasing your BTL.

Accountants

Many landlords use an accountant. It’s an additional cost, but they can often help you reduce the tax you need to pay, saving you money in the long run. Ideally you want someone who is a specialist in property tax and has experience advising landlords.

It’s up to you to follow legislation, including regular inspections and maintaining tenants’ rights. You must handle repairs and maintenance, rent collection, tax payments and other legal requirements correctly. Items to keep up‒to‒date include:

• Annual gas safety inspection
• Energy Performance Certificate
• Property and landlord insurance
• Liability insurance

You can either manage everything yourself or hire professionals to take care of it for you. For example, you can avoid all the hassle of day‒to‒day management by taking on a fully managed service from your letting agent. Our sister company Foxtons can do exactly that for you.