Buy to Let Flat Mortgage
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Buy to Let Flat Mortgage
Can I get a mortgage on a Buy to Let flat? What type of mortgage do I need for a Buy to Let flat?
On any Buy to Let property, whether it’s a house or a flat, you can borrow the money for the purchase using a mortgage.
The mortgage you would need is the same for any property you’re going to rent out to tenants. You need a Buy to Let mortgage. You couldn’t just go and get a standard residential mortgage that you would use if you were going to live there.
Our job is to help you find the right one. If you ever want to give us a call, we can talk you through it.
What are the lending criteria for a mortgage on a Buy to Let flat?
Criteria for lending really depends on the specific circumstances of each case and the lender we’re looking to borrow money from. Typically for a Buy to Let mortgage, lenders like you to have a 25% deposit, although some will accept less than that. Generally, if you have less deposit, you would be looking at a slightly higher rate.
Lenders generally aren’t too concerned about the level of your personal income, as the lending is based on the rental income of the property. Having said that, many do like to see a minimum income of about £20,000 to £25,000 – while other lenders don’t require you to have an income at all.
In terms of the property itself, there aren’t many restrictive criteria about type or location, as long as it’s in a habitable condition. It’s got to have a working kitchen, bathroom and toilets.
From a borrower’s perspective, it’s always a good idea to have a good credit score or to work towards that, but it isn’t essential. Age matters less than on a residential mortgage, and a lot of lenders allow you to be much older with a Buy to Let.
How much can I borrow and how much deposit do I need for a Buy to Let flat?
How much you can borrow depends on the rental income of the property. Some lenders allow you to use your personal income to top it up, should the rental income not be quite as good as you would like.
We typically like about 25% deposit. Some lenders allow you to take a mortgage with less, but you will pay for it a little bit on the rate.
Should I choose interest-only or repayment on a Buy to Let mortgage for a flat?
Whether you choose an interest-only or repayment mortgage for your Buy to Let flat will really depend on your personal goals. Typically, most landlords will opt for interest-only for better cash flow.
Because you’re only paying the interest each month on your mortgage and not any of the mortgage balance, your monthly repayment is lower. Therefore, you’re going to get a greater return on a monthly basis.
If you choose a repayment mortgage, it’s the opposite. You pay the interest and a little bit of capital off the loan each month, which means you have a higher monthly payment. However, you’re working towards fully owning that property. The benefit with a repayment Buy to Let mortgage is mainly for retirement planning.
One day, you might fully own that property and you can sell it for a nice lump sum to retire on. With interest-only, it’s more about maximising that rental income.
Can I still get a mortgage on a flat if I’m a first-time Buy to Let investor?
Yes. First-time Buy to Let investors can still get a mortgage on a Buy to Let flat. Lenders used to be a bit wary about borrowers with no experience as landlords, but now there are lots of options available. You can even be a first-time buyer as well as a first-time landlord now.
If you need any help with that, give us a call. We’re more than happy to talk you through it and see what options are available for you.
Do you pay stamp duty on Buy to Let flats?
Yes, you need to pay stamp duty on any property purchase. Whether that’s a Buy to Let or your main residence, there will be stamp duty to pay.
What other costs do I need to consider for a mortgage on a Buy to Let flat?
There are a few different charges to consider. There’s the lender’s arrangement fee, which can be anywhere between £500 and a few thousand pounds, depending on the price of the property and the lender. However, you can add that to your loan, which will increase your monthly payment slightly.
Lenders often charge a valuation fee to check they are happy to lend on the property. Obviously, if you do want an independent property survey, that’s another cost to factor in. Those can cost anywhere from £500 to a few thousand pounds – but it can be worth the peace of mind of knowing what condition that property is in.
You also have the usual legal fees to pay, to cover the work of your solicitor for the purchase, much like on a residential property.
We also charge a fee for our service, but you only pay that if you’re happy to go ahead and we get you the mortgage offer.
What if I have bad credit? Can I still get a Buy to Let mortgage on a flat?
It’s still possible to get a mortgage if you don’t have a perfect credit score. The options may be a bit limited, but it depends on how severe your credit issues are.
We see a range of problems, from small blips like a minor missed payment for a phone bill or utility, through to bigger problems like significant missed payments on council tax or, even worse, a mortgage.
However, we can still assess the situation for you to see not only if it’s possible, but also to find options for you.
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How does remortgaging a Buy to Let flat work? Are there any differences here?
Just like a standard residential mortgage or a Buy to Let mortgage on a house, when your initial fixed period comes to an end, you’ll be able to remortgage onto a new rate without paying any early redemption charges. All you would need to do is give us a call.
We can catch up on your latest financial position and see if anything’s changed since you took out your mortgage. Once we know all the facts, we’ll do our research and come back with the right products for you.
The right option may in fact be to stick with your current lender, which is called a product transfer. We don’t charge for those, and will manage that to make it easy for you.
Can I get a Buy to Let mortgage on a flat if I’m self-employed?
There’s no difference here at all. You can get a Buy to Let mortgage on a flat if you’re self-employed and it all works exactly the same way. We look at your budgets, find the right mortgage for you and present you with our advice.
When you’re happy to go ahead, we put the application in for you. The only difference is how you prove your income. Employed people provide payslips and bank statements, while the self-employed would need the last two years’ SA302s and tax year overviews, as well as three months’ bank statements to show a bit of a track record.
That’s the only difference. The rates or products are just the same – it’s just how we prove that income.
How would I add additional properties to an existing Buy to Let portfolio? Are there any differences here for flats?
It’s pretty straightforward to add properties to an existing portfolio, and it makes no difference whether you’re buying a house or a flat.
The lender’s assessment of your case will include a check on your budget and financial situation. They’ll make sure that the rental income from the new property will cover the repayments and that you don’t already have more credit than you can afford. Once they’re satisfied that you can cover all the repayments, they issue the mortgage offer.
How do I get a Buy to Let mortgage on a flat? What’s the process?
We’d initially have a conversation to gather all the key information – what deposit you have, where you’re looking to buy, the type of tenants you want to let to and how much you earn.
On the same call, we’ll tell you roughly what rates we think would be on offer, what you can borrow, and how much the repayments would be.
We’ll then send out a link to our online portal to gather all the rest of the information on your whole situation, to find the perfect product for you. You’ll then get a full recommendation from us, including all the key information that you need to know about the mortgage.
If you’re happy with our recommendation, we’ll get you a Decision in Principle, which means you can make an offer on a property. Once you’ve found a property to buy and had your offer accepted, we put together a full application for the lender. They value the property, look at the documents and decide whether they’re happy to lend.
How can a mortgage broker help here? Any final thoughts?
It is our job to save you time, hassle and potentially money. Having us find the right mortgage, submit all the paperwork and deal with all the third parties will be a weight off your mind.
Also, as brokers we have access to exclusive deals. There may be something we can access that you couldn’t get by going down the high street. We’re there to talk you through the process, as well. We know it can be daunting. It’s a lot of money and a big step to take. We’ll make it as easy as we can for you.
Finally, we are also protection advisers. We make sure that your income can be guaranteed and that you’re not going to lose the property should anything happen.
Key Takeaways:
- You must use a Buy to Let mortgage for a rental property, not a standard residential mortgage.
- Lending criteria are primarily based on the property’s rental income, though some lenders may require the borrower to have a minimum personal income (e.g., £20,000 to £25,000).
- The typical deposit required is 25%, with some lenders accepting less, which may lead to a slightly higher interest rate.
- Most landlords choose interest-only mortgages for improved monthly cash flow, while repayment mortgages are often considered for long-term retirement planning.
- It is still possible to get a Buy to Let mortgage even if you are a first-time investor or have a less than perfect credit score, although options may be more limited.
A fee may be payable if we progress your application. Our average fee is around £200 and the maximum you may pay is £995 for Retirement Interest Only mortgages.
Mortgage Style Ltd, trading as Mortgage Style, is an appointed representative of HLPartnership Limited, which is authorised and regulated by the Financial Conduct Authority.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY TO LETS. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.