Main considerations about Buy to Let mortgages
It is worthwhile being aware of the following main differences between residential mortgages and Buy to Let mortgages:
Often Buy to Let mortgages are arranged on an interest-only basis. This means that you will not pay off any capital in the monthly repayments and would need to repay the mortgage loan in a lump sum at the end of the mortgage, often by selling the property.
Interest rates on Buy to Let mortgages are usually a little higher than residential loans. If you purchase through a limited company, rates can be higher again but with potential tax benefits.
Unlike a lot of residential mortgage rates, you will be required to put down a bigger deposit, usually in the region of 25%. Fairview Financial work with you to find the right rate with the right deposit.
How much you can borrow will be based on the earning potential and profitability (i.e. the rental income) and sometimes your earned income. The rent must more than adequately cover the monthly mortgage payments. Every lender has its own unique formula and some will lend more generously. Fairview Financial will help to determine who to use on this basis.
As a landlord you are taxed differently. You have to pay additional Stamp Duty when you buy your property and income tax on the rental income. Furthermore, when you eventually sell the Buy to Let property, you may have to pay Capital Gains Tax.
Information is based upon our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.