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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
How does a buy-to-let differ to a standard mortgage?
What’s the difference between a buy-to-let mortgage and a residential? I have noticed rates are higher on buy-to-let and wondered if I could use a standard residential mortgage to purchase a property to let out to tenants?
Answer
Buy-to-let mortgages are incredibly similar to residential mortgages, in that you can choose from fixed or variable rates on interest-only or repayment terms.
The key difference is that buy-to-let mortgages are priced based on the risk associated with investment (which a buy-to-let property is). Whereas, residential mortgages are priced based on the fact the property is your own home.
Generally, residential mortgages state in the terms and conditions that they cannot be let out without the lender’s explicit consent.
Being in breach of this contract can result in the lender calling the full amount of the mortgage in – probably not what you want.
It’s a valid question, but it’s essential you take the correct mortgage for how you intend to use the property.
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Question
How to get the best rates on a mortgage?
I am looking to remortgage a buy-to-let property I own and wondered what I need to do in order to take advantage of the best rates.
Would it be worth increasing the equity by injecting some of my savings? Or would hiking the rent help? I hope you can help.
Answer
Great question, but it’s difficult to give you a solid answer without the specific numbers involved.
The lower the loan-to-value (LTV), the better the pricing (although below 60% LTV rates don’t vary too much).
Likewise, the rental calculation can be limiting; if the rent you currently charge works on 145% coverage assuming a rate of 5.5% then you should have access to the most competitive rates without making any capital reduction.
I’d advise speaking to a broker who can run through the various financial permutations so you can see which route gets you access to the most appropriate and competitive rate.
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Question
Dividing a house into flats – do I need a buy-to-let?
I am considering purchasing a house which can be divided into two flats. I plan to live in one and rent out the other. I am not sure, however, whether I would need a buy-to-let mortgage or a normal residential deal for this.
I am also considering whether I might need to start with a two-year residential for the whole property and switch to two – one buy-to-let and one residential – when I remortgage? It’s mind blowing so any help would be gratefully received.
Answer
This scenario is a tricky one, but not impossible. You could take a residential mortgage now to acquire the building.
However, it’s unlikely the lender will agree to splitting it into two flats. Once you’ve split the property, you’ll need to break up the title, so each property has its own deeds; otherwise, neither a residential nor buy to let mortgage could cover the whole building.
While that might not sound too complex, the finance journey involved in this exercise is, so I’d really recommend you contact an experienced broker to run through how to do this and the costs involved.
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Question
Stamp duty holiday – can I benefit?
My partner and I would like to purchase a buy-to-let property as a way of saving for our retirement. We are hoping to buy now, in time for the stamp duty holiday deadline in September. But someone told us we won’t benefit from the ‘nil rate’ because we are buying a buy-to-let property! Is this true?
Answer
You will benefit, but not as much as if you were buying the property as your own residence. Buy to let investment properties are subject to a 3% surcharge, so you’ll still pay 3% on the first £250,000, rather than 0%.
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