Fox Davidson are a specialist buy-to-let mortgage broker. Voted best UK mortgage broker in 2017 and 2018, we provide our clients with expert advice and strategy for financing buy to let properties in the UK. We secure finance for all types of clients on all types of property.
What is a buy-to-let mortgage?
A buy-to-let mortgage is a loan secured on a property that you will let out. You can rent the property to a family, to individuals or to a company. When compared to a main residence mortgage, you will find that the mortgage rates and fees are typically higher on a buy-to-let mortgage. A loan amount for a buy-to-let mortgage is based on both your income and also on the rental income the property will achieve.
What are the typical lending terms for buy-to-let mortgages?
Fox Davidson have access across the UK buy-to-let mortgage market. We have access to thousands of products and each lender has their own varying criteria. As a rule, the following lending terms apply for buy-to-let mortgages:
- Maximum loan-to-value up to 80%
- Interest-only or capital and interest
- Loan based on the subject property rental income and/or your personal income
- Fixed, tracker and variable rate options
- Loans from £100,000 with no upward limit
How much can you borrow on a buy-to-let mortgage?
The amount you can borrow on a buy-to-let mortgage will depend on your personal income and the market rental income of the buy-to-let property. Some buy-to-let mortgage lenders will work out the maximum loan using just the rental income. If you have a large personal income you can often borrow substantially more using a lender that calculates their maximum loan using both personal and rental income.
Buy-to-let mortgage calculator
Each lender will work out how much you can borrow in a different way. We would need over 50 different calculators on this site to show you the difference. Fox Davidson will complete a fact-find with you and using our knowledge of the market we will match you with the correct lender for the loan amount you require.
As a rule, the following calculation can be used:
Monthly rent x 12 to annualise it. Divide this number by 140% and divide that number by 5.5%
The above calculation is your worst-case scenario. The Prudential Regulation Authority (PRA) increased the rent to loan calculations to take account of tax increases for landlords in 2017 onwards. The new regulations resulted in lenders amending their rent to loan calculations and most lenders settled on the above calculation.
Despite the PRA buy-to-let mortgage changes made in September 2017 you can borrow more if you buy in a limited company, have a large personal income, take 5 years fixed-rate, or use a lender not affected by the PRA criteria.
Large buy-to-let mortgages
A large buy-to-let mortgage is considered as borrowing above £1 million. Many high street banks will not lend above £1 million and therefore specialist large mortgage buy-to-let lenders will be utilised. The large buy-to-let mortgage lenders include specialist buy-to-let lenders and private banks.
Large buy-to-let mortgages are based on the rental income and/or your personal income. For high net worth clients wishing to finance large buy-to-let mortgages we can use a blend of rental income and your personal income to achieve lending of up to five times your gross annual income.
Compare buy-to-let mortgages
As a specialist buy-to-let mortgage broker, we have access to all types of buy-to-let mortgage lenders. We compare buy-to-mortgages from across the market.
We can finance:
- Buy-to-let mortgages for first-time landlords
- Buy-to-let mortgages for first-time buyers
- Buy-to-let mortgages for limited companies
- HMO mortgages
- Student-let buy-to-let mortgages
- Multiple units on one freehold
- Buy-to-let mortgages for British expats
- Buy-to-let mortgages for foreign nationals
- Commercial property buy-to-let mortgages
- Corporate-let buy-to-let mortgages
- Large buy-to-let mortgages of £1 million-plus
- Mortgages for holiday lets
Why you should use a specialist buy-to-let mortgage broker
As a specialist buy-to-let mortgage broker, we have an in-depth knowledge of buy-to-let lenders. A buy-to-let mortgage broker can finance all types of buy-to-let property and for all types of client. Fox Davidson was voted as best UK broker in 2017 (Money Age Awards) and 2018 (Mortgage Strategy Awards) and were finalists in the best buy-to-let mortgage broker in 2016 (Mortgage Strategy Awards).
We work closely with our clients to ensure we fully understand your property investment goals and objections to ensure we pair you with the right lender and the right buy to let product.
Using a buy-to-let mortgage broker gives you immediate access to high street banks, building societies, private banks and specialist, broker exclusive buy-to-let lenders.
At Fox Davidson, our aim is to provide our clients with expert buy-to-let advice and strategy. Working with a buy-to-let mortgage broker will save you time and money.
What is the stamp duty rate for buy-to-lets?
The rate of stamp duty for buy-to-let is higher than for your main residence. An increase of 3% is applied to each banding of stamp duty. Please refer to the table below:
|Buy-to-let and second home Stamp Duty tax bands|
|Brackets||Standard rate||Buy-to-let/second home rate (1st April 2016)|
|Up to £125,000||0%||3%|
|£125,001 – £250,000||2%||5%|
|£250,001 – £925,000||5%||8%|
|£925,001 – £1.5m||10%||13%|
Can you switch to a buy-to-let mortgage?
It is possible to switch your main residence mortgage into a buy-to-let mortgage. Lenders will need confirmation that you will move out of the current property. You will be required to be moving into a new main residence which may be a rental property or mortgaged.
Can you live in a house with a buy-to-let mortgage?
Buy-to-let mortgages are currently unregulated by the financial conduct authority (FCA). Main residence mortgages are regulated by the FCA. The two types of mortgages do not mix and therefore you are unable to take out a buy-to-let mortgage if you will intend to also live in the property. The way around this is to take out a main residence mortgage and request permission to rent rooms out to lodgers. Some lenders will allow you to have lodgers.
Can you rent out your house without a buy-to-let mortgage?
If you will be moving out of your main residence and wish to rent out the property you have two options. Firstly, you can remortgage the property on to an official buy-to-let mortgage. The second option is to contact your current lender and request ‘permission to let’ or ‘consent to let’. Most lenders will be understanding your changing circumstances and allow you consent to let. The term of the consent to let will vary with each lender. Some lenders will charge a fee and some lenders will increase the interest rate or switch you on to one of their buy-to-let products.
Can you release equity on a buy-to-let mortgage?
You can release the equity you have in a buy-to-let property. Buy-to-let lenders will lend up to 80% loan-to-value. There are several ways to do this and they are; buy-to-let remortgage to a new lender, further advance of money from the existing lender and a second charge buy-to-let mortgage.
Can you have an interest-only repayment buy-to-let mortgage?
Interest-only buy-to-let mortgages are widely available across many of the buy-to-let mortgage lenders. You can take out an interest-only buy-to-let mortgage up to 80% loan-to-value. The method of repayment for an interest-only buy-to-let mortgage is often from the sale of the property at the end of the term.
Buy-to-Let Mortgage Broker
A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or other debt secured on it. The FCA do not regulate most forms of buy-to-let mortgage.