Buy to let mortgages, which have been around since the late 1990s, are when investors borrow money in order to buy a property in the private rented sector to let out to tenants.
The amount an investor can borrow is linked to the amount of rental income they expect to receive from the tenant(s), and lenders usually need the rental income to be 120% of the mortgage payment. Some lenders will also check a landlord’s income from other sources too.
The fees and interest rates of buy-to-let mortgages are usually higher than traditional residential mortgages, and many people choose to take out the mortgage on an interest-only basis as it can be more advantageous from a tax perspective. If this option is chosen it means the borrower does not pay anything off of the lump sum borrowed each month. However, at the end of the mortgage term, the capital must be paid off in full, which many landlords will do by selling the property.
The Chancellor George Osborne recently announced that anyone buying a home that is a buy-to-let property or a second home will now have to pay a 3% surcharge on stamp duty. This came into effect on 1st April 2016.
So, what does this mean? An extra 3% levy will be applied to standard stamp duty rates on all purchases of property that are not intended to be the purchaser’s main home. Therefore, the stamp duty payable on a second home bought in England and Wales will be 3% on top of the normal stamp duty rates. For a £150,000 buy-to-let property for example, stamp duty has increased from 2% to 5%, so from £3,000 to £7,500.
The world of buy-to-let mortgages can seem daunting at first but, due to our knowledge, experience, support and guidance, we will help you through the mortgage maze to ensure you get the most suitable deal.
There may be a fee for mortgage advice, the precise amount will depend on your circumstances but we estimate that it will be £299. We do not charge a fee for our services for New Build Homes; we receive commission from the provider.