Buy-to-let (BTL) mortgages are for landlords who want to buy property to rent it out. Read our buy to let guide
Buy-to-let (BTL) mortgages are for landlords who want to buy property to rent it out. The rules around buy-to-let mortgages are similar tot hose around regular mortgages, but there are some key differences. Read on formore information about how they work, how to get one and what mistakes to avoid.
You can get a buy-to-let mortgage under the following circumstances:
Advising, arranging, lending and administering BTL mortgages for consumers is covered under the same laws as residential mortgages and is regulated by the Financial Conduct Authority (FCA)
The maximum you can borrow is linked to the amount of rental income you expect to receive. Lenders typically need the rental income to be 25–30% higher than your mortgage payment.
To find outwhat your rent might be, talk to local letting agents, or check the local pressand online to find out how much similar properties are rented for.
Most of the big banks and some specialist lenders offer BTL mortgages. Speak to us and we will help you find the right mortgage for you.
Don’t assume your property will always have tenants. There will almost certainly be ‘voids’ when the property is unoccupied or rent isn’t paid and you’ll need to have a financial ‘cushion’ to meet your mortgage payments. When you do have rent coming in, use some of it to top up your savings account.
You might also need savings for major repair bills. For example, the boiler might break down, or there might be a blocked drain.
Don’t fall into the trap of assuming you’ll be able to sell the propertyto repay the mortgage. If house prices fall, you might not be able to sell fo as much as you had hoped.
If this happens, you’ll be left to make up the difference on the mortgage.
If you’re a basic rate tax payer, CGT on buy to let second property’s is charged at 18% and if you’re a higher or additional rate tax payer it’s charged at 28%. With other assets, the basic-rate of CGT is 10%, and the higher-rate is 20%.
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 £11,700 (for the 2018/19 tax year). Couples who jointly own assets can combine this allowance, potentially allowing a gain of £23,400 (2018/19) to be made in the current tax year.
You can reduce your CGT bill by off setting costs like Stamp Duty, Solicitor and Estate agent fees or losses made on a sale of a buy to let property in a previous tax year by deducting these from any capital gain.
Any gain from the sale of your property, should be declared on your Self Assessment tax return for that tax year and will be included when working out your tax status for the year which push you into a higher bracket.
Find out moreabout Capital GainsTax and the rates you pay on Gov.uk
