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Buy To Let Mortgages

Buying an investment property is a big commitment whether it’s your first one or the 50th! Although they’re bought for many reasons, the majority of people buy an investment property to increase their annual earnings so getting the right advice is really important.

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who we are

Robin Mortgage Design are a whole of market mortgage & protection brokerage. Mortgage brokers who are whole of market have access to the largest pool of mortgage providers such as banks, building societies and pure mortgage lenders. When you choose us, you’ll be treated as an individual from the very start. We’ll take the time to understand your situation and propose suitable options for your mortgage & protection needs.

On this page, we’ll help you understand how you could get a mortgage and what you can do to prepare for your application. If you’d like to speak with an actual human at any point, then we can get you in touch with your personal mortgage consultant who will be on hand to guide you through every stage of your journey.

Buy to Let Mortgages

Buying an investment property is a big commitment whether it’s your first one or the 50th! Although they’re bought for many reasons, the majority of people buy an investment property to increase their annual earnings so getting the right advice is really important.

On this page, we’ll cover some of the different types of Buy to Let mortgages; but to get started, here are some of the facts to consider when buying an investment property:

  • The additional fees such as stamp duty and lender fees

  • Is the property fit for purpose and does it have the legal EPC certificate for renting?

  • Is the property licensed if it’s an HMO (House of Multiple Occupancy)?

  • Is there a good demand for rental properties in the area?

  • What effect will the new rental income have your tax position?

 

Some of these questions will need advice from tax advisers or solicitors; having a quality mortgage adviser on hand will give you the support you need, as well as highlighting where you may need additional, specialist advice.

 

So, let’s go through some of the Buy to Let options.

Wooden Toy Houses

Buy to Lets for First Time Buyers

If you’re considering buying your very first investment property and you’re also a brand new first time buyer, lenders will take different views on whether or not they’ll consider your application, there isn’t a one size fits all approach.

Some of the criteria that the lender will consider when making a decision will be around your income levels, credit history, whether you are buying as a limited company, your age and so on….We always recommend you speak to a professional mortgage advisor to help you navigate through the various options.

 

Things you should consider

If this is your first investment property, then it’s worth exploring these 3 factors:​

  1. Is the property in an area with good rental demand? This might be near Universities, Hospitals or other large institutions that employ a large number of people.

  2. Does the property have good transport links? Is the property near bus and rail transport or have easy access to main roads?

  3. Does the property comply with the new legislation for rental properties, such as EPCs (Energy Performance Certificates) and electrics?

 

​Of course, there are many more things to think about when buying an investment property, but these 3 are a great place to start!

How is affordability worked out for Buy to Let Mortgages?

Most Buy to Let mortgage lenders base the affordability on the rental income and then apply a rate which varies depending on the lender and the amount.​

A typical calculation would be 5% at 145%. But what does this actually mean? Here’s an example: Let’s say you need a £150,000 mortgage. The calculation would be: £150,000 x 5% divided 12 x 145% this would give you a value of £906. So, you would need a rental income of at least £906 to afford that value. If you’re a first-time buyer, then a full affordability calculation can be used, considering your income and outgoings.​

You can increase this affordability by reviewing all the lenders’ calculators or by taking a 5-year fixed rate. Some lenders will also use your personal income to help support the mortgage if needed.​

In recent years, Buy to Let affordability has become more complicated, so taking the right advice is really important.

Image by Bruno Martins

Portfolio Landlords

What is a portfolio landlord?

From a personal point of view, a portfolio of properties could be any number of properties that you own, but the question here is what do lenders see as a portfolio landlord?

 

Well in simple terms a portfolio landlord is someone who owns 4 or more mortgaged buy to let properties. Properties that unencumbered ‘mortgage free’ are typically discounted and then it depends on how many are in personal names or held in a limited company.

 

Am I treated differently as a portfolio landlord?

The simple answer to this is yes, we’re afraid you are. But, this isn’t a bad thing as different lenders take different views of portfolios, with some being more lenient than others.​

There are a lot of lenders who won’t lend to portfolio landlords, so depending on the set up of your portfolio and how many are mortgaged will influence which lender you can choose. ​

A mortgage broker will be able to help you navigate through this increasingly challenging market to secure the most suitable lender, whether that's with a high street bank or a specialist lender.

I've been declined as my loan to value is too high

If you’ve been declined because of your portfolio, then this is typically because your overall portfolio loan to value (LTV) is greater than the lender’s allowed limits, typically between 65% & 75%. Or it could be that the rental income won’t support the level required by the lender. 

Don’t worry though, we have access to lenders whose bread and butter is helping landlords. The main thing to concern yourself with initially is making sure that the portfolio income covers the outgoings. ​

If you’re concerned about the leverage across your portfolio, it’s best to consult a whole of market mortgage broker who can find all the options available to you.

Image by Verne Ho

Limited Company Buy to lets

What is a Limited Company Buy to Let?

So, what is a limited company Buy to Let?​ Well, it’s where you set up a UK limited company for the purpose of renting and managing property. Ltd company lending has become more popular in recent years, due to changes on the tax imposed on profit from land and property. Although we are experts in mortgage advice, we’re not experts in tax so it’s best to get specialist tax advice before committing to a limited company purchase.

 

Can I use any limited company to hold my Buy to Lets?

This is a great question, but one that doesn’t have a set yes / no answer! Some lenders will allow the purchase of the property to be completed under a variety of companies, whereas others only allow this for certain SIC codes. These codes are those that determine the purpose of the company. The most commonly required SIC codes are:​

  • 68100 - Buying and selling of own real estate

  • 68209 - Other letting and operating of own or leased real estate

  • 68320 - Management of real estate on a fee or contract basis​

If your company has one or more of these SIC codes then typically most lenders will consider your application. It’s worth noting though that if the company also holds other codes, you might be limited on your choice of lenders, or have the application declined all together.

Does a limited company Buy to Let mortgage cost more?

Well, this depends on how you look at it! In some cases, your rates of interest and fees may be higher, but the tax savings might make the property more profitable in the long term. 

We’re here to guide you through the most suitable mortgage, but you might want to consider discussing your options with a tax adviser to make sure that your mortgage is the right choice for you. If needed, we can recommend a tax advisor from our trusted network.

Residential building divided by a dotted

HMO - Houses of Multiple Occupancy 

What is a HMO?

Well, this depends on how you look at it! In some cases, your rates of interest and fees may be higher, but the tax savings might make the property more profitable in the long term. 

We’re here to guide you through the most suitable mortgage, but you might want to consider discussing your options with a tax adviser to make sure that your mortgage is the right choice for you. If needed, we can recommend a tax advisor from our trusted network.

 

What is a HMO licence and will I need one?

Due to the nature of HMO properties and the potential for higher rental yields, it has become common for landlords to rent the properties to a capacity greater than the property should hold or unfortunately, fail to keep the property safe. This meant that the Government, local councils and the FCA had to take action to make sure that HMO properties were safe places to live, so they imposed more regulations on these properties - especially for larger ones. 

Typically speaking, a property that’s rented to 3 or more households that share common areas such as a bathroom and kitchen will require an HMO licence and these can be granted by the Local council. These licences are not guaranteed and each council will have its own rules on what’s required to approve a licence; if approved they are typically valid for 5 years. 

It’s important to remember that the licence is for the property not the landlord, so if you hold multiple HMO properties, then you’ll need to check if every property needs a licence.

What happens if my HMO licence doesn’t get approved?

Unfortunately, not every HMO licence will be approved. Each council will evaluate whether or not the property is suitable, if it can facilitate the proposed number of tenants and the impact it will have on the community or street.​

If your application for an HMO licence is declined, then you must find out the reason why. It could be a simple change that’s needed and once corrected, you can apply again or appeal the decision. If that doesn’t work you can appeal to the Residential Property Tribunal.

Do Student Lets or Properties with Multiple Flats class as HMOs?

As an HMO is a property that’s let to 3 or more different people or families sharing a communal ground, such as a kitchen and bathroom, this means that typically a student let will be classed as an HMO. 

If the property is split into flats that have their own utilities, kitchens etc then this might not be classed as an HMO but will be treated as a specialist property by the lenders. 

In all cases, we recommended you seek advice from the local council to make sure you have the right provisions in place before you let the property.

How would I qualify for a HMO?

The majority of HMO mortgage lenders will want you to have experience in letting property but this doesn’t necessarily have to be with HMOs. However, there are some lenders that may consider new landlords with no previous experience.​

Although HMO mortgages are becoming more common, they are still a rather niche area of mortgage advice and as such some lenders will only use certain brokers. Speaking with a knowledgeable mortgage adviser will certainly be a benefit.​

Here are some of the points that lenders will typically want to know:​

  • Your experience as a landlord

  • Where your HMO is located

  • How many rooms could be let

  • Does the HMO have/need a license?

  • Does each room have its own AST agreement or is the AST for the entire house?

  • What the rental income will be, typically per room

  • What type of HMO or tenant you are looking for (students, professionals, housing association) 

This list doesn’t cover everything but does give you an idea of what the lender will want to know. In any case, you are best to seek advice from a specialist broker so that you understand all the available options.

Can I still get a buy to let with bad credit?

If you have adverse credit, there could still be options, but this really does depend on your credit history. The best thing you can do is to seek advice from a mortgage adviser and gain access to your credit report. Your dedicated adviser will then be able to let you know your options and when you'll be able to get a mortgage. There are specialist lenders that can help in certain cases, but there are no guarantees.

Here are some of the considerations if you've got a tainted credit history:

  • Bankruptcy and Individual Voluntary Agreements (IVAs) are widely acceptable once they’ve been discharged for 3 years. If you have a larger deposit to put towards a property, then other options may be available if they were discharged more recently than 3 years.

  • Debt management plans are widely accepted as long as they’ve been in place for 12 months or more and you’ve conducted the account excellently.

  • Defaults and CCJs are widely accepted, however there are many different solutions and options here. So even if you have something outstanding, lenders are willing to take a look.

  • Missed payments are widely accepted but it does depend on what the missed payments were for, the reason for the missed payments, how many payments have been missed and how long ago they were. Typically, lenders prefer your payments to be no more than two months behind without needing to look at more specialist mortgage products.

  • Payday Loans are widely accepted if they were paid off over 12 months ago. They can be frowned upon when applying for a mortgage as they are considered a last resort option for borrowing. In all cases, the lender would need to understand why the loan was taken out.

Whatever situation you’re in when it comes to bad credit, it’s always best to get advice from a mortgage advisor, ideally someone who is able to review all your options by searching the whole market.

 
Together at the Top

Why use a mortgage broker?

This is a really good question. Like most occupations, people can be very good at what they do with some being the ‘jack of all trades’. But normally if you want something doing you choose an expert. A mortgage broker is no different.

Mortgages and associated services are what we do, and we have the experience, knowledge, and qualifications to help secure your mortgage from the whole of market, not just a select panel, like some agents, comparison sites and single ties such as banks.

 

So, if you’d like honest, unbiased advice, suited solely to you, then a mortgage broker is just what you need.

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Robin Mortgage Design

22 South Street

Castlethorpe

Milton Keynes

Buckinghamshire

MK19 7EL

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP THE REPAYMENTS ON YOUR MORTGAGE

The information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK.

Not all forms of mortgage lending such as certain Buy to Lets are regulated by the Financial Conduct Authority along with some additional related services, such as Conveyancing. A full disclosure document will be provided to you.

If you are considering securing additional debts against your home: Think carefully about securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

Some links on this website will take you to third party websites. Robin Mortgage Design have no control over and are not responsible for the content of other sites.

*some services are by provided as a referral to a third party company. No personal information will be shared with such companies without your prior permission. Robin Mortgage Design have no control over these companies and cannot be held accountable for their service or advice.

Robin Mortgage Design is a trading style of Robin Partnership Ltd whom is an appointed representative of HL Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.  The registered Office of Robin Partnership Ltd is 22 South Street, Castlethorpe, Milton Keynes, Buckinghamshire, MK19 7EL. For more information please refer to the FCA register https://register.fca.org.uk

 

Robin Mortgage Design charge a broker fee which is only payable on mortgage offer. The precise amount will depend upon your circumstances however a typical fee is £395.00 and the maximum that could be charged is £1,495.00