Looking for a buy-to-let mortgage? Whether you’re an experienced landlord or considering your first buy to let investment, at The Mortgage Factory we’re always ready to construct future-proof advice!
A buy-to-let mortgages are for people who are looking to buy a property to let out to tenants, rather than to live in.
Whether you’re a first-time landlord or an experienced investor, it’s a good idea to speak to a buy-to-let mortgage broker about your options. Our specialist buy-to-let mortgage brokers offer access to over 90 lenders and 12,000 mortgages, so we can help you find the right mortgage for you!
So how does it work? Getting a mortgage on a buy-to-let property is different to getting a mortgage on a house you’re going to live in. Firstly, you’ll usually need a larger deposit, typically at least 20%.
Also, the amount you’ll be able to borrow is linked to how much rental income you expect to receive from your buy-to-let property investment rather than your income. Lenders typically require the rental income on your buy-to-let property to be 25%-30% higher than your monthly mortgage payments.
With an interest only buy-to-let mortgage, your mortgage payments each month will only cover the interest. You won’t pay off the original loan amount – the capital – until the end of the mortgage term. The interest only buy-to-let mortgage is the type of buy-to-let mortgage the majority of landlords choose.
With repayment buy-to-let mortgages, your monthly payments are made up of two parts – capital and interest. Your monthly payments will be higher but the property will be paid off by the end of the term.
If you plan to invest in a buy-to-let property it’s important you are aware that rules around tax have changed in recent years. For up-to-date information on how to manage tax for your buy to let investment talk to The Mortgage Factory’s whole of market advisors!
If you purchase a buy-to-let property and then sell it for a profit you may need to pay Capital Gains Tax. For basic rate taxpayers, Capital Gains Tax charged on second properties is 18% on gains made when selling the property. While the rate for higher or additional rate taxpayers is 28%. However you’ll only need to pay these rates on the gains that exceed your capital gains allowance. You can also deduct legitimate costs like stamp duty too, contact us for more information.
If you are interested in remortgaging a buy-to-let – perhaps to save money on your monthly mortgage payments or to release some equity to help you purchase another buy-to-let investment, read our guide on how to remortgage your property.
As a landlord, the rent you receive on your buy-to-let property investment is treated as taxable income and may be liable to income tax. The rate payable will depend on your income tax band. However you can minimise the tax you have to pay by deducting certain ‘allowable expenses’ such as letting agent fees and property maintenance.
Since April 2020 landlords have no longer been able to deduct mortgage expenses from their rental income to reduce their tax bill. Instead as a landlord you’ll receive a tax credit based on 20% of your mortgage interest payments.
Whether you’re considering a buy-to-let investment, or just looking for some impartial advice, it’s a wise move to speak to a buy-to-let mortgage broker to chat through your options. Our specialist buy-to-let mortgage brokers are here and ready to help you!
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances, with the fee being up to 1% but a typical fee is £495.