What are BTL (Buy-To-Let Mortgages) UK? Capital or Interest only products.
A Buy to Let mortgage (BTL) UK is a way for landlords to finance their property investment. Typically we will see a landlord make a deposit of 25%, and the lending bank will make up the 75%.
Buy-to-let mortgages (BTL) will require the landlord to make an application to the lending bank.
Banks will offer landlords various products that will vary from:
– The term (years)
– Capital repayment or interest-only rates
– The amount of loan as a percentage of the property (usually not exceeding 75%)
– Fixed mortgage interest rates over a long term or a variable rate that tracks the Bank of England (BoE) interest rate
Many property investors will want to use an interest-only mortgage. This helps manage cash flow month-to-month as interest-only products require less cash outlay each month than capital repayment mortgages.
Please use our free buy to let mortgage interest calculator to see how much interest you will need to pay the banks
How to get a BTL loan finance
Landlords will get a Buy to Let (BTL) mortgages through
– A broker
– Their own bank
– Comparison website
Landlords need to choose between using a mortgage broker with access to the whole market data or using their own bank.
Landlords also choose between using a mortgage broker to do the research or using comparative websites to identify suitable products.
Buy-to-let loan deals can be identified by a mortgage broker that keeps abreast of the lending market. Comparison websites do the same job but may not see all the mortgage products that have not been published.
A lot of information is required from the landlord when making an application. Lenders will need from the property investor the following:
– Income statements (be it wage slips or self-assessment tax returns)
– Bank statements from the last 6-12 months
– The property details, including the expected rental income
– How much money they are making as a deposit and the source of these funds (for Anti Money Laundering (AML) and ensure that the applicant has the money)
Lenders will also carry out due diligence on the applicant and property by:
– Performing credit checks on the applicants
– Reviewing the affordability of the individual to repay the BTL mortgage
– Condition of the investment by getting a surveyor to inspect the property.
The buy to let (BTL) mortgage application process can take between 2 to 12 weeks but can take longer if there are delays with the provision of information.
How many BTLs can I have?
Property investors will build a portfolio. Most banks will provide investors mortgages on their buy-to-lets but may limit the lending to four properties.
The four property buy-to-let criteria are pretty common. High street banks will either turn down the opportunity to work with the investors or seek a business proposal of how the property will be financed and support the repayments.
Many landlords have multiple banks that work with them to get over the four property rule. Typically seasoned professional landlords will not use high street banks once they have to once they have built a large property portfolio.
Limited companies obtaining a BTL finance from the banks
Many moons ago, banks would not likely loan money to a limited company to buy property. Many landlords are using property investment limited companies due to the Section 24 mortgage interest relief cap that prevents interest costs from being offset against rental income.
Banks have adapted to the times. Lenders will now loan money to a company director allowing Limited companies to obtain a buy-to-let (BTL) mortgage UK from the banks.
It is typical for banks to charge a greater interest rate than they would to individuals. This is because there is a greater risk.
Why use a broker? Interest rates matter. Getting the very best deal
Many property investors choose to use a mortgage broker for many reasons:
– A broker has more experience in identifying suitable products with the best interest rates for you. That way, you get the best mortgage deal without doing the research.
– Unlike banks, they are not usually tied to a small product range. High street banks can only offer their own mortgage product.
– Brokers have more time than landlords to investigate mortgage products and go through the application process
– Brokers have access to products that are not readily available to the public. A lot of products with discounted interest rates are not publicly available.
Brokers might charge a fee. These broker fees may be added to the mortgage, while others must be paid upfront.
BTL mortgage UK calculator
Optimise has developed a simple buy-to-let mortgage calculator to see what interest rates you will pay. You will also be able to use our mortgage calculator to see how much profit you will be left after the interest payments have been made.
You will till need your mortgage broker to identify the best mortgage product deal for you.