Buy-to-Let Tips

Where to go to get a Buy-To-Let (BTL) Mortgage

You can normally get a Buy-to-let (BTL) mortgage at any big bank or specialist lender. Some of these lenders only deal directly with brokers so it is a good idea to talk to your local Mortgage IQ Adviser as they may be able to access deals you can’t! BTL mortgages also have different criteria to other types of mortgages so it is good to speak to an expert who will know what lender will suit your circumstances.

Plan for periods without rental income

Don’t assume your property will always have tenants. You should plan for times when there isn’t rent being paid. It is inevitable that some tenants will move on and you need time to find a new tenant, or you may need to make improvements to the property Even when you’re not receiving rent the mortgage payments still need to be made, so you may want to consider having savings in place or a financial cushion to cover this scenario. Landlords are liable for property repair costs as well so you need to consider this possibility.

What other costs are there for a BTL?

As well as mortgage costs you will have to factor in some additional expenditure which may accompany your BTL property. These costs may include (but are not limited to)-

• Insurance costs
• Letting agent Fees (if you chose to use an agent rather than directly managing your rental)
• Property rates
• Tax
• Maintenance and repairs

Selling your BTL property

You may decide to take your BTL mortgage on an interest only or a capital repayment basis. Don’t assume that you will be able to sell the property, repay the mortgage and just walk away from a BTL. If house prices fall, you might not be able to sell for as much as you hoped for. When the mortgage amount owing is higher than the value of the property this is known as negative equity. If you choose to sell when a property is in negative equity you will have to make up the difference between the mortgage amount owing and the property sale price.

BTL tax implications

Capital Gains Tax (CGT) –If you are a basic rate, higher rate or additional rate taxpayer you will be charged CGT on a BTL second property. This means if you sell your BTL property for profit, you will usually pay CGT if you make a gain that is higher than the annual threshold.

You’ll also need to advise HMRC of your rental income each year, you may have to pay tax on profits you make from renting property. This should be declared on your self-assessment tax return for the tax year it was earned in. This might be taxed at 20%, 40% or 45% depending on your income tax band.

Your home or other property may be repossessed if you do not keep up repayments on your mortgage.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is dependent on individual circumstances.

Some buy to let mortgages are not regulated by the Financial Conduct Authority.