Personal Buy-to-Let mortgages & re-mortgages – the facts

If you are a buy-to-let landlord with a personally held portfolio, one way you can improve your profit margins is to re-mortgage properties to get a better deal.

As you will be aware, buy-to-let mortgages differ from personal mortgages in a number of respects. Key among them are:

• BTL mortgage fees and interest rates are usually higher
• Most (though not all) BTL mortgages are interest only, meaning you repay the full loan at the end of the mortgage term
• Minimum deposits tend to be high – 25% is common

Most crucially, though, many lenders now ask that you must earn 145% of mortgage repayments, rather than the 125% that was common beforehand. This is closing the market to many potential landlords.  

To get a buy-to-let mortgage, you’ll also need a good credit record and an income of (at the very least) £25,000 per year – although you’ll have a better chance of getting a good deal if you earn more. You’ll also need to remember that mortgages have age limits: typically you’ll need to be able to pay off the loan by the time you are 70 or 75. Finally, you’ll normally have to be a homeowner yourself (either outright, or with a mortgage) before a lender will consider you.

Buy-to-let mortgages are offered by banks, building societies and specialist lenders. However, whether you are looking for a first buy-to-let mortgage or a re-mortgage, it’s a very good idea to speak to a broker first – they should be able to find deals that are best tailored to your circumstances.

Why remortgage?

Because tax changes have eaten into the profits of landlords who hold buy-to-let properties personally, many are considering re-mortgaging. However, because lenders tend to ask for a higher rental income than before, finding a better deal can be difficult. To solve this, some landlords are re-mortgaging their own homes to release funds that they can use to reduce their buy-to-let debt.

For these reasons, it’s essential that you get specialist advice before seeking a buy-to-let mortgage or re-mortgage.

Another option open to you, however, is to set up a limited company for new buy-to-let purchases. There are different rules if you need to obtain mortgage finance as a limited company - please contact us if you need further guidance.