Buying a property as an investment
If you are looking to buy your first property as an investment or refinance an existing buy-to-let property to obtain a new rate, raise capital or complete improvements then we can guide you through the options available to you and advise on the best solution.
Buy-to-let mortgages are for landlords who want to buy property to rent it out. These types of mortgages are very similar to regular mortgages however there are some differences.
Buy-to-let mortgages are available to you:
- if you want to invest in houses or flats,
- if you can afford to take the risks of investing in a property,
- if you already own your own home,
- if you have a good credit record,
- if you earn more than £25,000 a year,
- if you are a certain age (the upper limit is 70 or 75 years old).
There are some key differences with buy-to-let mortgages such as:
- the fees tend to be higher,
- interest rates on buy-to-let mortgages are usually higher,
- the minimum deposit is usually 25% of the property’s value,
- most buy-to-let mortgages are interest-only.
We would advise you that the maximum you can borrow is linked to the amount of rental income you expect to receive at the property. Lenders typically need the rental income to be 25-30% higher than the mortgage payment.
We also need to point out that Stamp Duty Land Tax (SDLT) for buy-to-let properties is an extra 3% on top of the current SLT rate bands for properties above £40,000. You will also need to be aware of Capital Gains Tax with a second property. If you sell your buy-to-let property for profit, you will usually pay CGT if your gain is higher than the annual threshold of £12,000 (2020/21 tax year). The income you receive from the rent is also liable for income tax and this would need to be declared on your self-assessment tax return.
If you would like to talk to us to find out the options available to you, please get in touch today.
*Please note, that unlike most mortgage advice, the advice given on buy-to-let mortgages is not regulated by the Financial Conduct Authority (FCA). Your home maybe repossessed if you do not keep up repayment on your mortgage.
Levels of taxation may be subject to change and their value depends on your individual circumstances. Tax rules can change.