What is a Buy to Let mortgage?

16th August 2021

Buy to Let mortgages: What’s the 411?

A Buy to Let Mortgage is for when you buy a property to rent out to the public. The are very popular with investors as a way of adding to their portfolio. We have asked Stephanie Phillips-James, one of expert advisers, to break them down.

What is the criteria for being a landlord?

The majority of lenders will require that you already own your own home. In addition, many require that you earn at least £25,000 from a source not related to letting but this does differ between lenders. A minimum deposit of normally around 25% of the property value is also required by most lenders.

Can I use my rental income as a form of income to purchase another property?

It often depends on whether you currently have a mortgage to pay on your existing buy-to-let property. If you do, then ultimately a lender will see this as debt that needs to be taken into consideration. By speaking to a mortgage adviser, they will look at your individual circumstances and advise on what your options are.

Can I raise capital on my own home to put down as a deposit on my buy-to-let property?

This is possible but it’s best to speak to a mortgage adviser who can look at your individual circumstance and run through your options.

Will I be taxed on my rental income?

As a landlord, you would be taxed on the income you make through the rent payments in line with your personal income tax liabilities. We recommend speaking to an accountant before purchasing your first property.

What is a House in Multiple Occupancy (HMO)?

A property is classed as a HMO if there are more than three tenants living there who aren’t members of the same family. Another indication is if there are shared facilities i.e. kitchen, bathroom, toilet etc.

Your choice of lenders may be limited if you’re renting out a HMO, but your mortgage adviser will be able to go through this with you. Councils can also have individual rules around HMO, so if this is something you’re considering, we recommend you speak to your local council.

 

If you’d like to know more about Buy to Let mortgages, click here or read our expert guide.

Or feel free to get in touch! Click here and complete this short form about yourself – we’ll be in touch very shortly. With mortgage brokers in Winchester, Southampton, Farnham, Bishops Waltham, Alton, Chandlers Ford, Alresford, Romsey and Park Gate, you are never too far from mortgage advice.

Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

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