Buy to Let Flat Mortgage
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Buy to Let Flat Mortgage
Sam Bull talks to us about Buy to Let mortgages for flats.
Can I get a Buy to Let mortgage on a flat? What type of mortgage do I need for a Buy to Let flat?
Yes, mortgage lenders are happy to offer Buy to Let mortgages on flats. The main two types of mortgages available for Buy to Let flats would either be one in personal names or via a limited company, called a Special Purpose Vehicle (SPV).
What are the lending criteria for a Buy to Let mortgage on a flat?
Mortgage lenders all have different criteria for Buy to Let mortgages on flats. They will have criteria around the rental coverage, minimum income requirements, minimum deposit levels and credit history requirements.
These will also differ depending on whether you’re looking to buy in your personal name or via a limited company. It’s therefore important to work with a broker – we will take into account your whole circumstances before recommending the most suitable mortgage for the flat.
How much can I borrow and how much deposit do I need for a Buy to Let mortgage on a flat?
The amount you can borrow on a Buy to Let mortgage on a flat is dependent on the rental income the property can achieve. Most mortgage lenders need the rental income to cover the mortgage payments at a certain stress rate – which will often depend on the product you take out and also what rate of tax you pay.
Some mortgage lenders want the rental income to cover the mortgage payments by 145%, at a stressed interest rate of 6%. That’s just an example – the exact calculation will depend on your circumstances and the mortgage lender.
In terms of how much deposit you’ll need for a Buy to Let flat, mortgage lenders usually like applicants to have 25%. However, some can accept a 20% deposit.
Should I choose interest only or repayment on a Buy to Let mortgage for a flat?
Most applicants choose to have their Buy to Let mortgages on an interest-only basis to maximise the income that the property generates. However, other landlords prefer to have their Buy to Let mortgages on a repayment basis, especially if they don’t need the property to be income-generating.
They may prefer to get the mortgage paid down as quickly as possible for retirement planning. The repayment basis will generally depend on the objectives of the landlord.
What if I’m a first time Buy to Let investor? Can I still get a mortgage on a flat?
Some lenders are happy to lend to first-time landlords, although the majority want the applicant to be an owner-occupier already.
Of the lenders available on the market who can lend to first-time landlords and First Time Buyers, different mortgage criteria may apply.
Do you pay stamp duty on Buy to Let flats?
Yes, you would pay stamp duty on Buy to Let flats. The rate of stamp duty you pay doesn’t differ for a flat versus a house. It would still be the same.
What other costs do I need to consider for a mortgage on a Buy to Let flat?
You can expect to pay a valuation fee, admin fee and broker fee for the mortgage. The mortgage lender will also often have a product fee, but that would usually be added to the mortgage.
Then you’ll have solicitor’s fees, including your stamp duty. Those are the main fees to consider for a mortgage on a Buy to Let flat.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
What if I have bad credit? Can I still get a Buy to Let mortgage on a flat?
Yes, some mortgage lenders are happy to offer Buy to Let mortgages on flats to applicants with bad credit. We will request a copy of the client’s credit report to see exactly what the issues are, and then we’ll recommend the most suitable lender to accept the adverse credit on the report.
How does remortgaging a Buy to Let flat work?
Remortgaging a Buy to Let flat is similar to remortgaging any other property. We would shop around to find the most suitable product, and the new mortgage lender will send a valuer out to give a rental valuation and a property valuation.
That will determine the amount for the mortgage and the Loan to Value ratio for the product.
Can I get a Buy to Let mortgage on a flat if I’m self-employed?
Yes. Lenders are happy to offer Buy to Let mortgages on flats to self-employed applicants. Depending on the circumstances, some mortgage lenders have a minimum income requirement of £20,000.
For self-employed applicants, this would either be based on an average of the last two years’ net profit, if they’re sole traders, or an average of the last two years’ salary and dividends if they’re limited company owners.
But lots of mortgage lenders these days have no minimum income requirements and don’t actually require any income verification.
How does the process of adding additional properties to an existing Buy to Let portfolio work? Is it different for flats?
When landlords are adding additional properties to their Buy to Let portfolio, we would request a copy of their portfolio spreadsheet.
Mortgage lenders often have different requirements for portfolio landlords and so we would need all this information up front, to carry out the portfolio landlord checks. We usually have to do a stress test on the background portfolio as well.
But there would be no difference to landlords adding to their portfolio if the property is a flat. It’s the same whether buying a flat or a house.
How do I get a Buy to Let mortgage on a flat? What’s the process?
Applicants who are looking to get a Buy to Let mortgage on a flat would need to speak with a local mortgage broker like JB Mortgages. We’ve arranged hundreds of Buy to Let mortgages on flats.
We would first of all carry out an initial fact find, get some documents from the client, and then recommend the most suitable terms for the property the applicants are looking to buy.
What else do we need to know about getting a mortgage on a Buy to Let flat?
The main thing really is that Buy to Lets are quite property specific. The rental income will be different on every flat.
When landlords are looking to buy a property, it’s worth working closely with a mortgage broker. We can run the rental figures and hopefully get you a successful mortgage application.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
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