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We specialise in various types of buy-to-let arrangements, catering to portfolio and first-time landlords alike, regardless of property scale, ownership structure, or trust involvement.
Buying in a limited company
Buying through a limited company means you own the company, which in turn owns the properties. The company buys buy-to-let properties, manages mortgages, and pays corporation tax on profits.
To calculate the company’s profits, deduct allowable expenses from rental income, similar to other property ownership structures. In a limited company, the entire mortgage interest payment is tax-deductible, lowering profits and tax liability.
If you keep these profits within the company for future property investments, no additional tax obligations arise.
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If you are experiencing financial difficulty and struggling to make repayments, then you can contact your lender who may be able to help taking account of your individual circumstances. You may want to contact one of the free impartial money guidance and debt advice services such as StepChange, Citizens Advice, or Turn2Us.
Specialist HMO mortgages
Not all buy-to-let mortgage lenders provide these, and those that do may offer varying interest rates compared to standard buy-to-let mortgages.
An HMO is typically defined as a property housing 5 or more individuals, typically featuring 5-7 lettable rooms, and having multiple tenancy agreements. Houses subject to selective licensing are classified as HMOs if they meet at least one of these conditions.
Social Housing Mortgages
You’ll sign a lease with the provider for a pre-set term, and they will manage the property and arrange for tenants in need of accommodation. Monthly rental payments are guaranteed and made directly to you.
One key benefit of investing in supported living properties is that the registered provider handles property maintenance, offering a hands-off approach for investors. Whether you’re new to the industry or an experienced landlord, this could be an ideal option. However, renting to tenants who may be vulnerable, in need of care, or young children can limit the number of lenders willing to finance these leases.
Factors affecting lender availability include:
- Lease length
- Break clauses within the lease
- Level of support/care required
- Types of tenants
- Landlord experience
- The lease/care provider
Holiday Let Mortgages
The popularity of UK staycations has surged, especially post-pandemic, with platforms like Airbnb offering diverse options—from coastal holidays in Cornwall to city escapes in Edinburgh.
High demand means holiday lets often yield higher returns than standard rentals, making them attractive property investments. Securing a holiday let mortgage is similar to a buy-to-let mortgage, depending on property value, loan-to-value ratio, financial background, and projected income.
Some lenders consider standard rental income, while others focus on the typically higher holiday let income, such as low, medium, high weekly rental income.
Bridging Loans
It “bridges the gap” between the purchase of a property and the subsequent refinancing or sale needed to repay the loan. An exit strategy is required before funds are released.
How Does a Bridging Loan Work?
Repayments
Interest is charged monthly, typically over three to eighteen months. Payments are often deferred and rolled up, then paid when the loan is redeemed. Some lenders may allow repayments during the loan term if you have experience with this type of finance.
Loan to Value (LTV)
LTV is the ratio of the loan amount to the property’s value. Bridging loans can use the purchase price, open market value, or gross development value (GDV).
For example:
Purchase price: £150,000
Open market value: £195,000
GDV: £265,000
LTV examples at 70%:
On purchase price: £105,000
On market value: £136,500
On GDV: £185,500
Higher borrowing means higher interest charges.
Speed and Cost
Timing: Funding is typically available within weeks, offering more flexibility than remortgaging.
Costs: Bridging loans are more expensive than standard mortgages, with rates ranging from 0.5% to 1.5% per month. Fees include arrangement fees (1-2%), legal fees, valuation fees, administration fees, and exit fees.
Exit Options
Repayment strategies must be in place:
Refinance: Use a traditional mortgage to repay the bridging loan.
Sell the Property: Sell a developed or refurbished property to repay the loan, ensuring the sale covers the loan and interest.
Why work with us for your buy-to-let portfolio?
Whether you’re a new or experienced landlord, we’d love to support you on your property investment journey.
Come see in person at one of the many property networking meetings we speak at – Kent Property Meet, Premier Property, Property Advanced Wealth System.
Call us to find out more: 01322 553282
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Getting A Mortgage: FAQs
I have a question about...
What is a mortgage?
A mortgage is a loan which is secured against a property. Typically, a mortgage is used to purchase the property against which it is secured, but could also be used to release equity for things such as home improvements.
Will I be accepted for a mortgage?
Mortgage approval depends on various factors like credit score, income, and debt. Lenders assess your financial profile and then decide whether to accept you along with which product would be suitable.
How does the mortgage application process work?
The mortgage application involves several steps: initial discussion with a broker, decision in principle, documentation submission and full application, property valuation and then completion.
How much can I afford to borrow?
The amount you can borrow varies depending on factors such as the value of property you are buying, size of deposit and financial profile including income, credit commitments and credit score.
How much deposit will I need?
The larger deposit you have means the smaller mortgage loan you will require. First-time buyers can, for example, purchase with a 5% deposit however 10%-25% is more typical. You may be able to access lower rates if you have a larger deposit.
What is a buy-to-let mortgage?
A buy-to-let mortgage is specifically for purchasing properties to rent out. It differs from a residential mortgage, considering potential rental income and property investment.
How much can I borrow?
The amount depends on rental income, property value, and your financial status. Lenders typically calculate loan eligibility based on these factors, ensuring sustainable repayments.
Are interest rates higher for buy-to-let?
Yes, interest rates are often higher for buy-to-let loans. Lenders perceive rental properties as higher risk. However, favorable rates might be secured with a substantial deposit and strong financial credentials.
Can I live in a property myself?
Generally, no. Buy-to-let mortgages are designed for investment properties. Living in a property financed by a buy-to-let mortgage could breach the terms of the loan.
What are the tax implications of buy-to-let mortgages?
Tax rules vary, but rental income is usually taxable. Mortgage interest relief has changed, so it's crucial to understand tax implications and consider seeking advice from a financial professional.
What is later life lending?
Equity release enables homeowners, typically over 55, to unlock a portion of their home's value while retaining occupancy. It provides a lump sum or regular income.
How does later life lending affect inheritance?
Equity release may reduce the inheritance you leave. It's crucial to understand implications and discuss options with family members before proceeding.
Can I move house with later life lending?
Yes, many later life lending plans allow you to move, but specific terms apply. Seek advice to explore portability options and potential impacts on the loan.
Will I owe more than my house is worth?
Equity release is a regulated product and has a built in no negative equity guarantee meaning you will never owe more than your house is worth.
Is my health a factor?
Yes, some plans consider health factors. Poor health may result in more favorable terms. Consult with experts to explore options tailored to your individual circumstances.
What is bridging finance?
Bridging finance is a short-term loan used to bridge gaps between transactions, commonly in property purchases. It provides quick access to funds while awaiting long-term financing.
How fast can finance be arranged?
Bridging loans can be secured swiftly, often within a few days. The process is expedited, making it ideal for time-sensitive property transactions or urgent financial needs.
What are interest rates like?
Interest rates vary but are typically higher than traditional loans due to the short-term nature and quick availability. Rates depend on the lender and your financial profile.
Can bridging be used for any purpose I choose?
While commonly used in property transactions, bridging finance can be versatile. It can be used for various purposes, such as business needs or renovations, depending on the lender's policies.
What happens if I can't repay the loan on time?
If you can't repay on time, options may include refinancing, extending the loan, or selling the property. Communication with the lender is key to exploring suitable solutions.
What does buildings and contents insurance cover?
Home insurance covers property damage (buildings) and personal belongings (contents). It safeguards against risks like fire, theft, and natural disasters, ensuring financial protection for homeowners.
Why should I consider income protection?
Income protection ensures financial security if you're unable to work due to illness or injury. It provides a regular income, easing financial strain during recovery periods.
How are home insurance premiums calculated?
Premiums are calculated based on factors like property value, contents worth, location, and personal details. Customized quotes consider specific risks and coverage requirements for comprehensive protection.
Can income protection cover self-employed individuals?
Yes, income protection is crucial for self-employed individuals. It provides a safety net, covering lost earnings during periods of incapacity, offering financial stability for those without employee benefits.
Are there exclusions in home insurance policies?
Yes, exclusions may include deliberate damage, wear and tear, and certain high-risk activities. It's vital to review policy terms carefully and choose coverage aligned with your specific needs.