Specialised Buy To Let Mortgages

What Is A Buy-To-Let Mortgage?

This form of mortgage is a loan that enables you to make a profit on a property you own by renting it out to tenants. Unlike residential mortgages, buy-to-let mortgages are typically arranged on an interest-only basis, meaning that you, as the landlord, will pay back the interest on any loan and not the monthly repayments towards what you have borrowed. Instead, you pay back the full loan amount at the end of the mortgage term.

Am I Eligible For A Buy-To-Let Mortage?

You must meet criteria for a buy-to-let mortgage, all of which we can discuss with you and offer our specialist guidance on. These criteria many lenders consider includes:

Income: this will determine the amount you can borrow. However, this factor often more relaxed for buy-to-Let mortgages.
Age: certain lenders have stricter criteria than others in regards to the age of the applicant. You must be 18 years to apply for buy-to-let mortgages; however, many providers may prefer an applicant to be over 21, or in some cased 25 or older.
The property you wish to purchase: standard properties are much more mortgageable as some lenders will dismiss any listed building and those with thatched roods or timbers frame constructions; anything they may see as 'high risk'.
The property's intended use: straightforward letting arrangements are seen more favourably by lenders, with student accommodation and holiday lets less so.
Homeowner status: loans are more readily granted if you have been the homeowner for a longer period of time and have kept up with your regular repayments.

Whether you’re a seasoned investor or exploring the option of becoming a landlord for the first time, you may already be aware that a range of reforms on the buy-to-let sector in recent months have impacted the factors you should consider first?

These reforms may affect your decision to invest in buy-to-let property; however, but The Lending Channel are experts in the industry, providing tailored advice to help you find the right options depending on your current circumstances.

What’s Changed?

Landlords must now register with either The Property Ombudsman ^[1] (in Scotland, The Property Ombudsman Scotland ^[2], a separate legal body) or The Property Redress Scheme ^[3] to provide an independent arbiter who can rule in disputes between landlords and tenants (or letting agents and their customers).

Any property to be leased after April 2018 must also have a minimum energy efficiency rating of E. (Pre-existing tenancies had until 2020 to comply.) Providing false information on this could lead to a fine of up to £5000, so if you’re looking now, be sure to clarify the property’s energy rating if you are interested in buying it.

Local Authority registration

Many local authorities now require you to register as a landlord, even if you’re an expat seeking lending to let a property in the UK while you are resident overseas. Around 300 Local Authorities across the UK either have some form of scheme in place already or are currently consulting on introducing a landlord registration scheme. We recommend you check your local council’s website to see if this affects you.

There are also proposals to introduce inspections on rented properties every three years. While this is not yet confirmed, bear it in mind when looking at the overall condition of any property you’re considering making an offer on.

Tax Changes

The government has increased the Capital Gains Tax (CGT) allowance for 2020-21. It has recently changed from £12,000 to £12,300. However, the CGT system currently in place is still under review, so there may be changes to look out for in the near future.

For all options in the buy-to-let market, we recommend that you seek specialist advice from an authorised tax advisor before making any firm commitments as The Lending Channel is not authorised as tax advisors.

Lender Requirements

Against all this, lenders are also imposing their own stricter restrictions on portfolio mortgages. Suppose you are adding a fourth property (or above) to your rental portfolio. In that case, you will now need to show full financial information for each existing property when applying for new finance.

This means that if you’re already heavily mortgaged with your existing portfolio, a lender might now refuse to advance any additional loan.

The Abolition of Section 21

In 2019, the government was considering the abolition of Section 21, which allowed landlords to end ‘rolling’ tenancies without reason and with two months’ notice. This reform may see movement in the coming years, and so is something buy-to-let investors should keep an eye on.

CASE STUDY
Client Need An experienced property investor who owned one property in a limited company structure and a further six, which were mainly HMOs in Edinburgh, were owned in their name. For various reasons, they wanted to move all six into the company, primarily to streamline administration. In having six properties to transact, they were aware they could take advantage of the relief from the 3% Additional Dwelling Supplement on LBTT. One of the properties was a current primary residence, and intending to turn it into a buy-to-let this added a further element that provided an issue for some lenders.
Solution Bank of Scotland funded a £1.2m Partially Amortised Loan at a sub 3% pay rate across six of the properties
Client Comment “The Lending Channel appraised the complex detail of my proposition and didn’t shy away from the challenge. Working within limited company lending, HMO lending in Scotland – with a ‘Let to Buy’ element – was not an easy proposition during late 2017/early 2018. The Lending Channel excelled in listening to my requirements, took on board my competing parameters of flexibility, price and capital raised, and delivered the best solution within what the market could offer at the time. Hats off to the dedication and patience of all the team for helping to deliver a proposition that has helped my business expand.” MP Edinburgh.

CASE STUDY

Client Need

An experienced property investor who owned one property in a limited company structure and a further six, which were mainly HMOs in Edinburgh, were owned in their name. For various reasons, they wanted to move all six into the company, primarily to streamline administration.

In having six properties to transact, they were aware they could take advantage of the relief from the 3% Additional Dwelling Supplement on LBTT. One of the properties was a current primary residence, and intending to turn it into a buy-to-let this added a further element that provided an issue for some lenders.

Solution

Bank of Scotland funded a £1.2m Partially Amortised Loan at a sub 3% pay rate across six of the properties

Client Comment

“The Lending Channel appraised the complex detail of my proposition and didn’t shy away from the challenge. Working within limited company lending, HMO lending in Scotland – with a ‘Let to Buy’ element – was not an easy proposition during late 2017/early 2018.

The Lending Channel excelled in listening to my requirements, took on board my competing parameters of flexibility, price and capital raised, and delivered the best solution within what the market could offer at the time. Hats off to the dedication and patience of all the team for helping to deliver a proposition that has helped my business expand.” MP Edinburgh.

Why Choose The Lending Channel

Portfolio Lending

We support many professional landlords and specialise in large, multi-property transactions, where portfolios of more than 40 properties are not uncommon. This category applies to anyone with a portfolio of four or more properties.

Limited Company Lending

This route is available for landlords who want to acquire new property by setting up a new Special Purpose Vehicle (SPV) or those who wish to transfer properties currently under their name into a new company.

Transferring six or more properties into a limited company will allow clients to get relief from the 3% Additional Dwelling Supplement charge.

HMO Lending

Landlords active in the House of Multiple Occupation (HMO) market, commonly used for student accommodation, can obtain specialist deals.

Short-Term Holiday Lets

There are tax advantages to this option, making it increasingly popular as an alternative to traditional buy-to-let. You can offset the interest you will pay on a mortgage for a holiday lodge against its rental income.

You need a specific mortgage for the short-term holiday letting market, and fewer lenders are offering this mortgage product. Typically, they’ll impose stricter restrictions on the loan to value they’ll advance.

If you want to explore any of these options further, call one of our specialist advisors today on 01738 583008 or contact us, and we’ll call you back.

The Lending Channel is a specialist buy-to-let mortgage broker and not a lender meaning we can help find you the best options for you, with a tailored approach and simple to understand mortgage advice.