Self-Employed Buy to Let Mortgages
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What are the features of a Buy to Let Mortgage?
There are a few differences when it comes to Buy to Let mortgage products in comparison to the standard residential mortgage. For example most lenders will require you to own a residential property and will require a 25% deposit as opposed to the standard 10%.
Some lenders will have minimum income requirements and will need you to be on at least £25,000 annually to qualify for a buy to let mortgage. The affordability on Buy to Let mortgages is based on the rental income of the property that you plan on letting out, ideally 125% or above the mortgage payment.
Many lenders will offer contractors to use the rental income and contractor income together as top slicing (see below for definition). You can find flexible Buy to Let mortgages where you can choose an interest only payment mode.
Every lender is different, and it is important to read into the criteria and agreements behind the buy to ensure it is the right product for you. Bespoke Mortgage Experts are on hand to help find the right lender for you based on your current situation.
What things should I consider if I am Self-employed and investing in a Buy to Let Mortgage?
If you are Self-Employed, Buy to Let mortgages are available to you but there are a few things that you should consider. You will need to have at least a years’ accounting and taxes paid to prove you can afford it.
You need to be sensible and look at your income and ensure that you would be able to afford the repayments on the property; if the property has no tenants for whatever reason, the mortgage payments will not stop. You will need landlord insurance too before being able to let the property out.
You need to consider what type of tenants you are looking for and ensure they are reliable as to not have tenants who fall behind in rent. These are all important aspects to consider. The location is important and the rental market around that location will need investigating to make sure it is worth your while.
Buy to Let as an individual or as a company?
It is becoming more popular to invest in properties through the Limited Company route, this is because the laws have changed around rental income being tax deductible as an individual investor.
This is why many investors will opt to invest through Limited companies due to the tax efficiency. It is worth getting in touch with a Mortgage Broker and Tax Adviser to seek mortgage advice and tell them your current situation, they will be able to help you when it comes to choosing how to invest.
What is top slicing?
Top slicing is a method used and offered by lenders to use the borrower’s personal income to top up any rent that isn’t there to get the loan amount that they seek.
It is a good feature offered by lenders as they will look into other sources of income and take them into account for the loan amount you will receive. The lender will be thorough, it is important to have correctly declared incomings.
You should speak to an accountant in regard to top slicing if you have other means of income or any retained profits. It can have tax implications and it is always worth speaking to a professional especially when it comes to your finances.
How is my income assessed as a contractor investing in a Buy to Let property?
Lenders will tend to look at your SA302 tax calculations and overviews. This will be to ensure that you have paid tax and to understand your incomings. Your income tax rate will be explored as well as the rental income estimate from the property.
What are the tax implications involved?
Buy to Let mortgages will focus on your income tax rather than if you are a high rate or a low rate taxpayer. If you are Self-Employed and receive a daily rate then you may be able to borrow more in comparison to a high rate taxpayer.
If you are looking for a fixed deal, lenders will allow you to borrow more if it is for a longer period of time, for example, five years or more. There are downsides to fixed mortgage deals and it is worth seeking the help of a mortgage broker for advice.
How can Bespoke Mortgage and Finance help?
When it comes to investing you want to make sure that you have made the right decision in where you are putting your money. At Bespoke Mortgage And Finance Centre Ltd we have knowledge of the mortgage market and can find the right lender for you.
There are some mortgage products that are not authorised and regulated by the financial conduct authority. If you are Self-Employed mortgages can seem daunting but with the right mortgage expert, mortgages can be made simple.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE