If you’re thinking of purchasing an investment property, the first thing you must think about is financing. You’ll almost certainly need a mortgage unless you have a large sum ready to invest. The first thing to keep in mind is that buy to let mortgages aren’t the same as regular mortgages; there are significant distinctions between them and residential mortgages.
Here we answer a few commonly asked questions about buy to let mortgages to help you understand the rules and determine if one is right for you.

What Is A Buy to Let Mortgage?

A buy-to-let mortgage is intended for the purchase of residential properties. Interest rates, deposits, and other fees for buy-to-let properties are expected to vary from those for residential properties. This is because financial institutions see rented properties as a greater risk of investment than owner-occupied homes; if the tenant defaults on their rent or you can’t find one in the first place, you may find yourself unable to pay off your mortgage. When applying for a mortgage, it’s important to state that you’re looking for a buy-to-let product right away.


Can I Qualify for a Buy-to-Let Mortgage?

To be approved for a buy-to-let mortgage, you must show that you can afford the monthly payments. This ensures that apart from the rent you will get, you will need a good credit rating and no major debts as well as healthy earnings. You must also demonstrate that the property you want to purchase will be a reasonable investment – that there is a sufficient demand for you to find renters and that the rent you will earn will cover your monthly expenses. While being a first-time buyer would not preclude you from obtaining a buy to let mortgage deal, you will find it more difficult to secure one than if you have previously purchased property. This is because first-time buyers have fewer options when it comes to buy-to-let mortgages. Speak to a buy to let mortgage broker to figure out how much you may be able to borrow.

How Do Buy to Let Mortgages Work?

Buy-to-let mortgages are frequently offered on an interest-only, rather than repayment arrangement, which means you’ll only pay interest on the loan each month, rather than a percentage of the total amount borrowed. While your monthly payments will be smaller, you will not have paid off the loan at the end of the term. Many people believe they will be able to repay the loan by selling the property, which may be possible if you’ve owned it for a long time, but it can’t be guaranteed. If the value of the property has dropped or you are unable to sell it, you will need to find some way to pay off the debt. Fees on buy-to-let mortgages are frequently higher than on residential mortgages, with some lenders charging upfront payments. Some lenders can offer deals with a lower fee in return for a relatively higher rate of interest, similar to regular residential mortgages.

What is the buy-to-let tax rate for 2021?

For 2020-21, the government increased the capital gains tax exemption. It rose in value from £12,000 to £12,300. As a result, if you sell a second home, you will gain more money tax-free. However, landlords pay a higher capital gains tax rate: 18% for basic-rate taxpayers and 28% for higher and additional rate taxpayers.

How Can We Help?

If you’re considering investing in a buy-to-let property, can help you with every aspect of your new investment, including buy to let mortgages and financial advice. Please contact us if you have any concerns or would like to learn more about how we can help you. Do you have any questions about the topic above? Our team of experts is here to help in answering any query you may have.

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