Stepping into the world of investment property and not sure what to expect? We’ve put together this guide answering all your questions on getting a buy-to-let mortgage as a first-time landlord.
So you’re looking to buy your first buy-to-let property and become a landlord, congrats! Investing in property looks different for everyone, and there are many varied opportunities and property types.
When investing in property for the first time, there are several things you’ll need to consider. We’ve put together this overview of the main features of a buy-to-let mortgage, the costs involved and any rules you need to be aware of.
First thing to consider: who is applying for the mortgage?
And by who, we actually mean who or what. Will you be applying in your own name? Or will you be using an SPV Limited Company? Or even a Trading Company? There are good reasons to use each one of these options, so make sure you understand which suits you best and will align with your property investment goals.
Second thing to consider: buy-to-let property types
What type of property do you want to invest in? it’s worth remembering that more complex property types could require more specialist mortgage products. Examples of these could be HMOs or flats on top of commercial properties. Our experts can help you decide which kind of mortgage is best for the property you’re purchasing.
Third thing to consider: your plans
What are your property investment plans? What are you hoping to achieve from your mortgage product? Remember that the cheapest rate available isn’t necessarily the best rate for you and your situation, so make sure you’ve considered exactly what you need. Is it financial security over a long period of time, like a five or ten-year fixed mortgage? Or is it securing finance for a short-term goal? Perhaps you want the reassurance that your lender allows Product Transfers, or the knowledge that you can secure additional borrowing in the future.
Whatever it may be, a mortgage expert can then help you find the best rates for the product type you want.
How can I start with property investment?
Once you have considered the three points above, it’s time to start thinking about taking the first steps – starting with your deposit.
The deposit
How much you can afford to put down for a deposit will impact how much you can afford to borrow, and consequently what kind of property you can buy. Higher deposits will help you access better mortgage interest rates, and for a buy-to-let mortgage, you’ll need at least a 25% deposit. Use our mortgage calculator to find out how much you can borrow.
Your expert mortgage broker
If you haven’t already, now is the time to start speaking with an experienced buy-to-let mortgage broker and get some expert guidance. When you’re clear on what you want and what you can afford, they’ll help you find the best mortgage product available.
How much can I borrow on a buy-to-let mortgage?
We’re afraid there’s no easy answer for this. How much you can borrow will depend on a number of factors like the type of product you’re after, the property value and your rental income.
Rental income is how much you make from your investment property. Your gross rental income is the total amount your tenant pays before you subtract any expenses and your net rental income is what you take home after you’ve subtracted the expenses. These expenses are things like fees, running costs, or taxes.
Each lender will apply their own stress Test against the rental income in order to calculate the maximum amount of money you can borrow. This is where an expert buy-to-let mortgage broker is useful – they can advise on which lenders let you borrow more per pound of rental income, boosting your affordability.
Speak to The Mortgage Hut today
Ready to start looking for the right buy-to-let mortgage product to kick off your landlord journey? Or perhaps you still have a few questions? Wherever you are on your path to property investment, The Mortgage Hut is here to help.
Our expert mortgage advisors are here to answer your questions and guide you on your mortgage application to ensure you make the best decisions and maximise your investments. Contact us today to get started.
FAQs
What’s the difference between a buy-to-let and a residential mortgage?
A residential mortgage is used for a property you live in, and a buy-to-let mortgage is used for a property you rent to tenants. You will need a buy-to-let mortgage to be able to start letting out your property.
Another difference is that buy-to-let is not a regulated industry like residential mortgages. This is because buy-to-let mortgages are considered to be business transactions, so they aren’t eligible for the FCA’s consumer regulations. However, you do have access to the Financial Services Ombudsman and Financial Services Compensation Scheme.
Do I need experience in property investment to get a buy-to-let mortgage?
Not necessarily, but lenders may require that you own your own home as a minimum. This will show the lender that you’re not totally new to the property market and already have some experience and knowledge of it.
However, it’s not the end of the world if you don’t already own your own home. There are options for first-time buyer-landlords, albeit more limited. An expert mortgage broker can help you find a specialist lender who will consider your application. For this particular scenario, your affordability will be calculated using your income and spending.
