Whether you are a first-time landlord, adding another property to your existing portfolio, sourcing an HMO (House of Multiple Occupation) or purchasing a property in the name of a Limited Company/SPVs (Special Purpose Vehicles), obtaining a Buy-to-Let mortgage has never been easier with the help of an experienced broker. In a constantly changing market however, you need to be aware of lender requirements, tax rules and changes in legislation. Aspire Financial Services can provide much needed assistance and, as “whole of market” advisers, get you the very best deal available.
Specialist advice is vital as lender criteria varies significantly:
• Interest Coverage Stress Testing
• Maximum age, maximum Loan to Value (LTV)
• Maximum number of properties you can hold
• Will they lend to a Limited Company? Not all lenders do.
The above list is not exhaustive and merely sets out some of the many elements that must be considered. Buy-to-let mortgages can be a complicated area and advice from a specialist broker will certainly help.
There are some lenders who will consider a 20% deposit however, most require a minimum deposit of 25%, especially during the current Covid-19 pandemic. You will get a much more competitive mainstream rate if you have a 25% deposit. Anything less and you would be limiting your options and likely to end up paying much higher rates.
Interest Only is the most common mortgage when it comes to buy-to-let. Repayment mortgages are also available. However, it can be harder to meet the interest coverage as set out in the lender’s Interest Rate Ratio (ICR) criteria if you select this option.
Your buy-to-let plans can be affected by legislation and lender criteria. These include but are not limited to:
• Energy-Efficiency rating of the property
• Room sizes in HMO
• ‘Portfolio landlord’ status
• Buying as an individual or a limited company
You should obtain advice from a specialist buy-to-let broker before purchasing a property. We also work closely with experienced tax advisers and would be happy to introduce you if you wish to discuss the recent changes from HMRC and understand how these can impact the overall profitability of your investment.
Whilst there are some lenders who do not insist on a minimum income, most lenders require you to have an income of between £15,000.00 – £25,000.00.
• Affordability is calculated on the rental value. It must be able to meet the monthly interest repayments at the agreed rate, taking into account relevant tax deductions. This is known as the Interest Coverage Ratio (ICR)
• The ICR calculation varies from lender to lender
• ICR will also depend on whether you are a standard or higher rate tax payer, a portfolio landlord or operating as a limited company.
Buy-to-let mortgages are widely available but in order to avoid the common pitfalls, you should seek specialist advice from an experienced broker. Contact us at Aspire Financial Services to discuss your requirements further.