From buying your first home to commercial mortgages, we can help you get the best rate for your circumstances
Arranging a buy-to-let (BTL) mortgage is similar in many ways to any other mortgage, however the main difference is that instead of living in the property you intend to rent it out.
The BTL lender will also look at different factors when assessing the maximum loan available. One of the most important issues will be the potential rent the property is able to attract. The lender may also require you to have a minimum annual income in the region of up to £25,000, although this is not always the case.
You will require a deposit for a purchase of at least 15% of the value of the property, typically however most BTL mortgages are at 75-80% loan to value (LTV).
We will assess your personal circumstances, the subject property and your investment strategy before recommending the most suitable product to meet your needs.
Stamp Duty Land Tax (SDLT)
SDLT is tax you pay when you buy a property. There is a standard calculation when you buy your main home, which goes up the more expensive it is. The same applies when buying further properties, but now includes an additional 3% charge.
You will have to pay this surcharge whether it’s a second home, a new home if planning to rent out your current one (known as ‘let to buy’), or a BTL purchase, even if you’re living in rented accommodation yourself.
You are liable to pay tax on income earned from rental property. This is income tax if it’s a personal purchase, or corporation tax if you own it through a limited company. The amount depends on rental income, mortgage interest and other tax-deductible costs.
Up until the 2016/17 tax year, landlords could deduct mortgage interest and other allowable costs from their rental income, before calculating their tax liability. From 6 April 2020, tax relief for finance costs will be restricted to the basic rate of income tax, currently 20%.
These changes will not affect you if you are a basic rate taxpayer however if you are a higher or additional rate tax payer, or will become one after your rental income is taken into account then your profit will be reduced or potentially even make a loss after tax.
It can be more tax efficient for higher and additional rate taxpayers to invest in property via a limited company as the tax changes do not apply to limited companies. We can put you in touch with tax specialists who can guide you through the most tax efficient way of purchasing a rental property.