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A buy to let mortgage is aimed at those who are purchasing property with the intention of renting it out. The minimum deposit on a buy to let (BTL) mortgage is 25% of the property;s value. The product fees can sometimes be higher than residential mortgage products. The affordability check will be based upon the rental income of the property, but keep in mind that you will need capital for the short fall when there is no rental income.
Lenders will need you to own the residential property that you live in and there is a minimum income requirement of £25,000 a year. Some mortgage lenders will allow self-employed borrowers to use rental income and contracts as top slicing. You also have the flexibility of choosing to pay interest only on BTL mortgages.
You need to consider where to invest and make sure that there is a rental market there. You will be assessed on the rental income, so you need to ensure it is adequate enough to cover the mortgage repayments. Make sure that you have landlord insurance to cover yourself and keep some capital as there will be no tenant at times.
You need to budget and ensure that you can afford as a self-employed person to invest. Your stream of income needs to be stable enough when there is no rental income to cover repayments on your mortgage.
From April 2020 tax rules have changed and the interest you pay as an investor is no longer a tax-deductible expense. This is why the mortgage market is seeing a boom in contractors applying as limited companies.
You should speak to a mortgage advisor to know for certain the right route for you as every self-employed business is different. Both have positive and negative points, and a broker will be able to give you advice based upon your own personal circumstances.
If you already have a residential mortgage, then your current lender will have already assessed your income so it will be assessed in the same way. Most lenders will look at your SA302 tax calculations and tax returns to ensure you can keep up with mortgage payments.
Whether you are inside or outside a IR35 contract you will be able to invest in a BTL property. Lenders are becoming more flexible when it comes to BTL and the type of contract you hold compared to residential mortgages.
It doesn’t really matter what taxpayer you are – lenders will focus on your income tax rate. If you are a self-employed contractor who has a day rate income, and you fall within basic rate tax then you can sometimes borrow more in comparison to a high-rate taxpayer.
If you are looking for a fixed deal which lasts for five years or more then you may be able to borrow more as you are seeking a long-term deal. There are downsides to fixed deals however and you should make sure to look into lenders terms before committing.
A mortgage broker has access to the whole of the mortgage market and knows what lenders will have options for you. It can be difficult to find the right product and when it comes to investing you want to make sure you are getting the most out of your money.
Mortgage brokers are authorised and regulated by the financial conduct authority meaning they are qualified to help and can help with the legal documentation too. Brokers pride themselves in being efficient and making sure that they are catering to your needs. A general enquiry will not incur a fee so you can seek expert advice just from a call.
Mortgage advice is a speciality and they can help you with your mortgage application.
We know the importance of securing your future and knowing that you are making the right commitments. The mortgage market can be a minefield and we can help you to navigate through the lenders to the right mortgage for you. We put you first and want to make sure you feel more educated about mortgages and know everything you need to.
We have built trust with lenders and want to build trust with you and will tailor your mortgage mission to success whilst talking all of your needs and wants into accounts. We will be honest and look into your financial situation then advise you on the route to take. Get in touch – don’t hesitate and MASTER your future today.