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Whether you’re an experienced landlord with a property portfolio or a first time landlord looking to get started, Plura are here to help.
Buy to let mortgages are for people who want to buy a property & rent it out, usually for profit. Property has become a popular investment over the years & there are a couple of ways you can invest:
To find out which investment route is right for you, we can discuss the difference in products & criteria but cannot give you advice related to taxation. Given the recent changes to how income from property is taxed, limited company borrowing has seen a significant growth in popularity. However, your personal circumstances will need to be discussed with a suitably qualified accountant to ensure that you pick the right option for you.
If you would like a recommendation to a property specialist accountant that we work very closely with, just ask!
When considering buy-to-let investing, there are 2 main strategies:
There’s no right or wrong answer, just what’s right for you. If you’re just getting started, we’d love to help you understand investment strategies, hear about your goals & work with you to find the most suitable route to go down.
Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority
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A popular strategy to grow your investment property portfolio is to remortgage your existing Buy to Let properties & raise money to buy a new buy to let property.
If the value of your investment property increases over the years since you bought it, you may be able to remortgage back up to 75% to take some money out of the property, in the hopes of acquiring more Buy to Let property with the proceeds: increasing your portfolio & increasing your income.
We help ambitious landlords do exactly this & we’d love to be a part of your property power team for life!
For the more experienced growth minded landlords!
In most cases you are considered a portfolio landlord if you own 4 or more mortgaged Buy-to-let properties, however some lenders have their threshold set a 3 mortgaged buy-to-let properties. If you are considered a portfolio landlord, some lenders will not lend to this kind of customers & those who will, often look at your portfolio as a whole when calculating your maximum borrowing capacity on any additional properties you are to buy. They do this to check that the overall borrowing on your portfolio doesn’t exceed 75% & isn’t too highly mortgaged.
There are still plenty of options available to portfolio landlords, but the value of a broker significantly increases due to the increase in complexity when assessing your next property purchase mortgage options.
Single self-contained unit – a standard buy to let property rented out to an individual or a family for them to live in as a residential property. A lot of choice of lenders & the most common type of Buy-to-let property.
House in Multiple Occupation (HMO) – for landlords looking to rent out rooms to unrelated individuals, while sharing common facilities. These properties are much more specialist and licenses are required in a lot of areas. They can generate significantly higher income but can be a lot more complicated to manage
Multi-Unit Block (MUB) – MUB’s are self contained units without the need for shared common facilities, typically flats, held under a single title. Again, more of a specialist investment type with higher earning potential, with additional complications to manage.
Holiday Lets – These are properties that you plan to rent out to holiday goers or travelers in a desirable location. Rented on a very short term basis many times a year to many different individuals and families. The maximum borrowing is usually dependent on the low, medium & high average rental income over a defined number of weeks throughout the year which is set by a lender.
For example, a seaside holiday let is likely to be very quiet during the winter period, but at full occupancy over the summer months. The lender has to take this into account. Lenders are likely to ask a local holiday lettings agent for evidence of the predicted income of the property during low, medium & high periods & then they will multiply this average figure by an amount of weeks significantly below the 52 weeks that are in a year. For example, 30 weeks. This is to account for void periods, which are common for this type of property.
Holiday lets are a fantastic opportunity to boost the amount of income a single property can make you, but come with a lot of cleaning & management costs & are a higher risk investment, particularly in areas with a lot of competition & lower demand.
Lenders calculate how much you can borrow based on the rental income of the property & your income tax rate in most circumstances. Your whole portfolio will likely be assessed if you are a portfolio landlord however.
Typically you will need a 25% deposit to invest in Buy-to-Let property. Fewer lenders may consider lending up to 80% of the property value.
Interest only mortgages typically come with a lower monthly cost, but you are not repaying any of the capital borrowed against the property. For example, if you took a 20 year interest only mortgage for £100,000, at the end of that 20 years if nothing at all changed, you would still owe £100,000.
Repayment mortgages do what they say on the tin; they pay the mortgage off over the years in return for a higher monthly mortgage payment. In the same example as above, after 20 years you would own the property mortgage free.
The most common way to invest is interest-only so that landlords can benefit from more ‘passive’ income. Your selection will be made depending on your goals and priorities for investing. If you just want a few mortgage free properties, perhaps capital repayment might work for you. But if you want to grow a property portfolio… you’re likely to pick Interest Only so you can reinvest the earned income to buy more.
No right or wrong answers, just the way you want to do it!
Firstly, understand WHY you’re investing. See the strategies further up this page. Buy-to-let property, unlike residential property, should be considered purely as an investment and should help you toward meeting your goals.
Make sure you have a 25% deposit saved. You should probably then consider who will manage the property. Do you want to be a hands-on investor, dealing directly with the tenant, the issues arising from the property etc… or would you prefer to pay an Estate Agent & if so, how much would they charge?
Once you know why you’re investing & who you want to manage the property, the search begins! You then need to look for properties in an area you think will have rental demand, speak to an Estate agent about the market value rent for properties you’re interested in, then speak to your advisor to see if the investment makes sense & meets affordability requirements. Make sure you ask yourself, does it meet my objectives after mortgage costs?
Lastly, before committing, it’s worth speaking with your accountant to see how it would affect your tax affairs. Sometimes owning investment property can bump you up a tax band which means you may no longer be eligible for some benefits.
Once your happy, dive right in & start your investment journey!
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Whether you’re an experienced landlord looking to get the most out of your property’s or a new landlord looking to get started, get in touch to see how we can support you on your journey
Plura is a trading style of Plura Mortgage Advice Ltd which is an Appointed Representative of PRIMIS Mortgage Network which is a trading name of First Complete Limited. First Complete Limited is authorised and regulated by the Financial Conduct Authority. Registered Office 25-29 Sandy Way. Yeadon, Leeds, LS19 7EW. Registered in England & Wales with company number 14931418. We charge a fee for Mortgage Advice, usually £395, but this can vary depending on the service you are receiving. We’re also paid commission from the lender
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK
