Buy, remortgage or release equity from your investment properties
Buy, remortgage or release equity from your investment properties
Investing in residential property can be one of the best ways to maximise your returns and build long-term value. By taking out a residential buy to let mortgage you can unlock equity from your existing portfolio for further investment, or use the loan to purchase new properties.
Investing in residential property can be one of the best ways to maximise your returns and build long-term value. By taking out a residential buy to let mortgage you can unlock equity from your existing portfolio for further investment, or use the loan to purchase new properties.
A buy to let mortgage is a mortgage for property investors who are purchasing a residential property to let out. Properties can be houses, flats, HMOs or student accommodation. Buy to let mortgages can be taken out in personal names, or increasingly in Limited Companies for tax reasons.
The mortgage can be used to purchase the property, to refinance an existing mortgage, or to release equity from the property. You generally need a larger deposit than for home mortgages and the interest rates are normally higher. Typically buy to let mortgages aren’t regulated by the Financial Conduct Authority (FCA).
Lenders will need to verify that you can afford to meet the monthly mortgage repayments, as well as meeting other specific criteria. Once approved, they’ll send a valuer out to confirm the value of the building and then their solicitors will set about the legal work.
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Buy to let mortgages require a hefty deposit, and that should be a major consideration before the mortgage hunt begins. The amount that you’ll need varies, depending on what the lender thinks you’ll be able to afford, and what type of property you’re hoping to buy.
Usually a buy to let deposit will need to be at least 25% of the overall purchase price. That means lenders can lend up to 75% loan to value (LTV). Of course, many property investors hope to pay the smallest possible deposit, so it’s well worth shopping around to establish the amount that different lenders are able to offer. In some cases you may be able to fund the entire purchase price by offering a second property as security to a lender.
Each lender has their own set of criteria that you must meet in order to be considered for a buy to let loan. The list of eligibility checks that lenders use to decide whether or not to lend include assessments of your experience, income and credit history. They’ll also assess the type of property you’re buying, the quality of tenant and how much rent you’ll get.
Typically you’ll be eligible for a buy to let mortgage if:
Arranging a buy to let mortgage will take a similar amount of time to arranging your personal mortgage. The process involves gaining approval, instructing valuers, and then the conveyancing process with solicitors.
Use our calculator to work out how much you may be able to borrow
A buy to let mortgage will usually come with an arrangement fee and an annual interest rate. You will also need to pay for a valuation fee and solicitor fees.
Typical lender costs may include:
Application fee: often added to the loan. Typically around 1.5%, but sometimes this can be as low as 1% or as high as 2%.
Interest rate: normally shown as an annual interest rate. Depending on the lender’s assessment of your risk rating, this often ranges from 2.5% to 6% per annum. You can normally opt for fixed rates for 2 years of 5 years, or variable rates (these are often a little cheaper, but could rise during the loan term).
Other fees: such as early repayment charges, and third party fees such as valuation fees. Always read the loan contract in detail.
Which lender has the best buy to let mortgage rates? It’s a simple question but the answer depends on your specific situation. Buy to let mortgage interest rates vary from lender to lender based on their view of your risk profile. Lenders have their own risk appetites and scorecards, but a helpful way to get an idea of what interest rate you could get is to think in terms of “risk bands”:
Talk to one of our Business Finance Specialists. We’re on hand to take you through the options available.
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