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Buy To Let

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With a buy to let mortgage many lenders will base the amount of advance they are prepared to lend based upon the rental income that a property is expected to achieve.

Leasing a Home

The majority of lenders now tend to use a rental calculation based on the amount of the mortgage advance using a stress test or ICR ( interest coverage ratio)  ie £100000 x 6.5% /12 x 145%= £785.42 (rental projection amount pm needed)

The stress test varies between lenders and on whether you are choosing a 5 year deal ( currently the interest rate stress rate is  lower on a 5 year fixed deal which allows greater lending that a or shorter term deal ie 2 year fixed based on the rental received

Most lenders use rental calculations at 125% for basic rate tax payers and  145% for higher rate tax payers 

Some lender will consider top slicing using additional earned income or rent to increase lending capacity 

Please feel free to phone to discuss any questions that you may have 

House and bicycle

Before you purchase a property on a buy to let basis you should also consider the following

Do you wish to buy in your individual name or through a limited company 

Check out quotes both ways and then check out with your accountant which is the most tax efficient way

for you to proceed

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Area & Tenant

Area that you wish to buy in

Demand in the area for property

Type of tenant you will rent to ( council, students, professional)

Expected rental income from the property

You will need to check carefully that your proposed property, and that tenant is acceptable to your lender (as some lenders refuse to lend on ex council property, and / or DSS tenants).

Deal

Consider what type of deal you wish to have

Fixed, Discounted or Tracker

Do you want to repay your mortgage on a Capital and Interest basis or Interest only basis

Do you want to be able to make overpayments on your mortgage.

Other Matters to Consider

Allow yourself a surplus emergency fund as this will allow you to carry out any repairs or alterations to the property

Allow you a fund for periods when the property is not rented out (change of tenants)

Be aware of the tax implications of owning the property

If you require any assistance please contact us and we will be able to assist you with your enquiry.

Find your deal and apply now - click here

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