Buy to let mortgages
A buy to let mortgage is a loan you take out to buy a property or land that you are going to rent out. Buy-to-let mortgages are different to ordinary residential mortgages because the amount you borrow doesn’t depend on how much you earn and there are so many lenders do not have minimum income requirements
Company Buy to Let Mortgage
Getting investment properties under company name is considered as tax efficient way to build up the property portfolio.
Companies that trade only in rental property are known as Special Purpose Vehicle (SPV) limited companies. They can be classified in different ways by lenders, according to the Standard Industry Classification (SIC) code that the company is registered at Companies House.
Typically, these include:
- 68100: Buying and selling own real estate
- 68201: Renting and operating of Housing Association real estate
- 68209: Other letting and operating of own or leased real estate
For those classed as SPVs, getting a BTL is now more straightforward than for firms trading as other SIC categories
Buy-to-let mortgages are a lot like ordinary mortgages, but with some key differences:
- The fees tend to be higher than the residential mortgage.
- Interest rates on buy-to-let mortgages are usually higher.
- The minimum deposit for a buy-to-let mortgage is usually 20% of the property’s value (although it can vary between 15-35%).
- Most BTL mortgages are interest-only. But at the end of the mortgage term, you repay the original loan in full or you have a clear exit strategy. BTL mortgages are also available on a repayment basis.
- Most BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA). There are exceptions, for example, if you wish to let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling). These are often referred to as a consumer buy to let mortgages and are assessed according to the same strict affordability rules as a residential mortgage.
- When working out how much you can borrow a mortgage lender will take several factors into account such as:
- How much rent you will be able to charge (rental coverage) The rent should normally be at least a quarter higher than you monthly mortgage payments.
- There are a lot of different types of buy-to-let mortgage such as fixed rate, tracker rate and a standard variable rate.