Get expert help with your Buy to Let mortgage
The buy to let market has changed considerably in recent years with more changes on the horizon. If you are thinking about buying a property to let, there are a number of things that need to be considered. CMME can advise you on the best buy to let mortgages and help with the mortgage process once you are ready to move forward.
Buy to Let mortgage guide
Our comprehesive Buy to Let guide covers the most important points to consider when embarking on a Buy to Let mortgage and covers the following topics;
- How do Buy to Let mortgages work
- How much you may be able to borrow
- Is letting a good investment
- What are the risks?
- Things to consider before buying
- Buy to Let properties and tax
Visit the Buy to Let mortgage guide
Buy to Let questions
Q. How much can I borrow to fund a buy to let property purchase?
A. CMME has access to schemes based almost entirely on the rental income that your purchase is expected to generate. This means they only need to show minimal proof of your income when applying for buy to let mortgage. However, most lenders will require that the expected rent covers between 125 to 145% of your mortgage payments.
Learn more: Buy to let Calculator
Q. Can I buy a second home rather than a rental property?
A. This has become a growing concern for those looking for a second home or getaway. CMME have mortgage schemes specifically tailored to help independent professionals take full advantage of the growing number of buy to let mortgage products and can help you secure finance without the need to prove that your own income can support both loans.
Q. I want to move but can't or don't want to sell my current home.
A. By reversing the buy to let concept, CMME can arrange a loan on your current property to finance the purchase of a new home. 'Let to buy' is an ideal solution if you're unable or don’t want to sell your current house but are looking to purchase a new property.
Q. I have an existing rental property. Can I release some of the profit made from my house?
A. CMME can arrange a re-mortgage that allows you to switch to an alternative scheme and release some of the equity in your rental property at the same time. Quite often these schemes can be fees-free or fees-assisted (where some of the fees are paid by your new lender). In this way a larger loan may cost you less than the existing one, due to the way we take the whole market into consideration when searching for a competitive rate.
Q. Will I have to pay a higher interest rate than on a residential mortgage?
Marginally higher interest rates are the norm when it comes to 'buy to let' mortgages. This is largely due to the perception that mortgages on rental properties are less secure that those attached to a property that’s considered a long-term home.
Q. I am a Conrtractor, wow long do I need to have been contracting?
CMME have the ability to arrange a buy to let mortgage within a week of you starting your first contract.
Q. I am a Contractor, how long do I need to have remaining on my contract?
As buy to let mortgages are usually based on the amount of income expected from rental, the amount of time remaining on your contract is generally not important. However, some lenders do require a minimum of 6 weeks left on your existing contract.
Q. How long does the mortgage process take?
This largely depends on which lender both you and CMME agree best fits your circumstances. However, in some cases, CMME can have approval of your loan within minutes.
Q. What supporting documentation will I need to provide?
Ordinarily, CMME and the lender need proof that your existing mortgage is paid up to date and a two items of ID. A rental assessment on the new property from an ARLA registered letting agent would be useful in terms of initial underwriting.
Learn more: Supporting documents
Q Will I have to accept costly loyalty clauses to secure a mortgage?
A. CMME pride themselves on always securing competitive interest rates whilst avoiding schemes that don’t provide you with an open and honest account of the full costs. Too many buyers have been tempted by lenders offering a low headline-grabbing rate only to find that they suffer for long periods at higher rates and are penalised with fees and charges if you attempt to break free. We can recommend a competitive selection of schemes that will allow you complete freedom to move your borrowing at any time or, at the very least, grant you that freedom as soon as your current rate expires.
Q. What will happen to my mortgage rate after the initial scheme expires.
A. CMME will be in touch two months before the expiry of any special rate that you’re benefiting from to discuss your options. Comparing what is on offer from the current lender with what is available elsewhere in the market, CMME will strive to ensure that you secure competitive interest rates throughout the life of your mortgage.
Q. My main mortgage is a repayment loan. Shall I go interest only or repayment on this new purchase?
A. Your adviser will talk through the benefits of both but most CMME clients choose to opt for an interest only loan on the buy to let property. This keeps their repayments lower and helps them meet the 125% rule - where rental income must cover the repayments by 125 to 145% - that’s applied by most lenders.
Becoming a Buy-to-Let landlord - 10 easy steps
- Secure an agreement in principle – a dedicated adviser will assess your needs and arrange an agreement in principle that you can use when negotiating and offering on a property.
- Find your perfect investment property – this can be both exciting and daunting, knowing how much you can borrow can help narrow your search.
- Make an offer – once you have found your property you can now start to negotiate a purchase price. The maximum size of your buy to let mortgage is calculated using the rental yield of the property, which needs to be 125% of the annual mortgage repayments.
- Contact your adviser to start the mortgage application – once you have agreed a purchase price for the property, you should call or email your adviser and we can kick start the mortgage application. At this stage, your adviser will introduce you to your dedicated mortgage processor who will ensure that your application runs smoothly.
- Your mortgage application “goes live” – in order to process your application you will need to provide various forms of identification. At this stage you will need to instruct a solicitor and your adviser will be able to make recommendations from an approved list, all on a no successful sale, no legal fees basis.
- Searches and building surveys are carried out on the property – various checks such as area searches and land surveys are carried out to protect you and the lender.
- Your mortgage offer will be produced – Once all the lenders searches and surveys have been completed, we will push your lender to issue a formal mortgage offer.
- Your solicitor will request your deposit money and exchange contracts.
- You will agree a completion date – a completion date is agreed with your solicitor and then negotiated with the seller.
- Congratulations, you are now the proud owner of a buy to let property!
Recent Stamp Duty Changes
- Stamp Duty
From April 2016 buy to let landlords will need to pay 3% extra on top of every stamp duty band when buying an additional property.
- Mortgage Interest Relief
The current mortgage interest relief perk is soon to be removed. Currently landlords can claim for interest on buy to let mortgage payments. This essentially allows individuals to offset the interest against the rental income, leaving them to pay only their marginal rate on the profit.
2017 will see the maximum tax relief limited to 20%.
Despite the changes there are still a number of benefits to building up a property portfolio.
Whatever happens to the mortgage market, there will always be a demand for renting. The number of tenants continues to increase year on year. This is due to a number of reasons from rising house prices to the flexibility that renting offers.
Record low rates
Mortgage rates for both residential and buy to let are still at record lows, and the Bank of England base rate is showing no signs of moving. In addition, landlords can benefit from the increase of competitive deals available in the market.
There is also the option of using your limited company to obtain an additional property. However, there are upsides and downsides to holding your buy to let portfolio in a company structure. For more information have a read through our guide.
For more information about a buy to let mortgage and to find out what is available to you, please contact us on 01489 555 080 to speak to a specialist mortgage consultant.