BUY TO LET & HOLIDAY HOMES

When looking to build a rental property portfolio, it’s essential to understand how buy to let or holiday homes mortgages work, and seek expert advice from a qualified mortgage broker. Mortgage lenders generally consider rental properties a much higher risk than homeowner mortgages, mainly due to a concern about the reliability of the rental income.

It’s important to understand that not all buy to let mortgages are available directly from the lenders, some lenders only work through regulated brokers in order to ensure the borrower's needs and their criteria are carefully matched.

Difference between Residential mortgages & Buy to Let mortgages

Five things you may need to know about differences between the lending criteria for homeowners and landlords.

  • Not all lenders being happy to finance rental properties or Holiday homes, if you are looking to expand your portfolio, or rent out your existing home, your current lender may not be able to help.
  • Obtaining the cheapest buy to let finance is crucial, getting the best interest rate is key to your sourcing a deal.
  • A major factor to you being offered the most competitive rate is the size of your deposit.   Typically you will need a 25% deposit. Generally, the bigger the deposit the better the rate.
  • Also, consider your investment properties carefully. It’s about the capital return rather than the location typically for a buy to let. A holiday home will be about about both location and rental income. We have strong connections with local agents who can assist you with getting the right property.
  • One key benefit when financing a buy to let, is that lending is typically made on an interest only basis. This reduces your monthly costs compared to a repayment mortgage as you don’t have to pay back any of the capital until the end of the mortgage agreement. In addition, HMRC consider letting to be a business, so the interest costs can be tax deductible from profits, although this could change.

Potential borrowers must ensure that their finances are in order when taking out a buy to let mortgage. From determining how much to borrow to buy a first investment property, to working out what tax implications may be applicable, each decision is equally as important.

To help you, we can discuss all the finance options for you and help answer you find answers to other questions by introducing you to other professionals involved in the process. Please contact one of our specialist advisers to discuss any of the topics below.

  • How much can you borrow to purchase an investment property?
  • You must consider how much you can borrow to what the tax implications are. Both of these will affect your decision to buy.
  • Should landlords choose a repayment or interest-only buy-to-let mortgage?
  • What to consider before buying an investment property
  • The tax implications of buying an investment property.
  • How to Let & manage an investment property?
  • Should you use your existing lender or switch?
  • Pension vs property investment
  • Tax warnings for landlords

There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage. Your property may repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is £395.

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