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The rules around landlord finance can be complicated from unusual properties, rental stress tests, limited company buy to let and more so for portfolio landlords. Your circumstances can limit options from minimum income, credit score and experience.
With Bespoke Finance you can apply online for a free enquiry and receive advice from mortgage advisers specialising in property investment finance.
A LTD Company is a “separate legal entity” which obtained finance to purchase the property in its name.
You will have a personal guarantee to the bank, that does not mean you have personal ownership rights.
So the Company owns the Property, but you will hold the Company based on the % of shares.
Each shareholder will need to be named on the application, provide details and a personal guarantee.
You can be 100% shareholder.
A Special Purpose Vehicle (SPV) is a Limited Company incorporated at Companies House as a Buy to Let Holding Company.
The lender requests this Company’s activities be limited to undertake property rental activities only.
If the company, for example, sold Widgets as well; that would not be an SPV but a trading company.
Mortgage Lenders do not like to lend to Trading Companies. They see the other activities as a potential risk.
The preferred method is a Special Purpose Vehicle (SPV).
You can obtain BTL Mortgages in a Trading Company, but your mortgage product options are limited.
It's not generally more difficult in term of criteria than purchasing in a personal name. In some instances (such as rental stress tests) it may be easier to buy in a Limited Company.
The number of mortgage products is restricted compared to the personal name, though it has been getting larger.
Yes - when buying property in an SPV Limited Company the directors and shareholders are often required to sign personal guarantees.
The personal guarantee requirement is mostly compulsory, except in exceptional cases where the Loan to Value (LTV) is very low. In such cases, a charge on the company as a whole may be taken - through this is a rare occurrence.
Asking a lender to take a risk by lending you the money, but requesting to not to give those same guarantees personally. As you imagine is not looked upon lightly.
A personal guarantee is a backstop - if the asset depreciates or missed payments. The lender has the equity (minimum 15% Deposit) as a safety buffer first. Therefore offering a personal guarantee may be seen as a medium risk. With the personal guarantee released on full repayment to the lender (such as selling the property).
When buying a property to rent out in a limited company, you will often need a Limited Company buy-to-let mortgage.
A minority of Mortgage Lenders offer Limited Company buy to let mortgages. These mortgage products may differ from standard buy-to-let mortgages.
Bespoke Finance can help you register a Limited Company (also known as an SPV), or your accountant. It is essential to register the correct SIC Codes and have a bank account in the company open for the mortgage direct debit.
As with a standard mortgage, they will base the lending on your personal circumstances. So a new SPV Company with no assets or income, set up on the same day, for example, is excellent. They will require personal guarantees from the directors/shareholders.
You can lend money to the company for the deposit from your personal assets.
Mortgage Lenders prefer companies that will only own and rent property. They dislike trading companies doing other activities.
No - typically on a remortgage there is no stamp duty to pay. It may be different if you are changing ownership, such as removing someone from ownership of a property or bringing in someone as a joint venture.
The Financial Conduct Authority (FCA) does not regulate most types of buy-to-let mortgages.
There are exceptions known as "consumer buy-to-let". Such products are if you are to rent the property to a close family member. (e.g. spouse, civil partner, child, grandparent, parent or sibling).
Regulated Buy-to-Let mortgages have stricter affordability rules similar to a residential mortgage.
The trend for buy-to-let mortgages has been to go for Interest Only.
With the Government recently removing mortgage interest relief. It can be in your best interest to look at repayment or part-repayment buy to let mortgages. To give you better returns on that investment over the years.
Landlords looking to expand their portfolio may prefer interest-only mortgages. Allowing lower payments, to save for further deposits for further properties, giving higher returns. Known as leveraging.
Whatever your plan our mortgage advisers can obtain for your repayment, part-repayment, interest-only and offset buy-to-let mortgages.
New regulations limit borrowing based on the rent deemed achievable by the lender's valuer. The minimum is assessed at a rate of 5.5% ensuring a 125% coverage.
As such for a £100,000 mortgage you would need at least £572 rent. Put simply you need £5.72 rent at a minimum for every £1,000 borrowing. That demonstrates the minimum - mortgage lender criteria may be tougher.
Mortgages are available up to 85% Loan to Value (LTV) for Purchase or Remortgage. 85% LTV Buy to Let Mortgages are the highest LTV you can get as a property investor. That's just a deposit of 15% of the property value.
Landlords with larger deposits can enjoy lower mortgage rates including lower fees. With the minimum deposit is 15% of the property value (85% LTV), Compared to 20% of the property value (80% LTV) the mortgage rate can be from 2% higher.
The monthly rental amount can limit the maximum loan achievable and therefore requiring higher deposits. Our mortgage advisors can help you release equity from other properties to raise a deposit.
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