Buy to Let Mortgages for the Self-Employed

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What are the features of a Buy to Let mortgage?

Buy to Let mortgages are a good way of investing in property and renting it out while you are still paying off the mortgage. There are criteria that you need to fit in order to access Buy to Let mortgages.

Whilst the majority of lenders will want you to own the house that you live in and most of these will require a £25,000 minimum income there are a handful that will allow you to purchase a property as a first time buyer. The product fees can be higher than your standard mortgage and you can expect to pay 25% as a minimum for the deposit.

The affordability checks will be different in comparison to a residential mortgage. Lenders will still want to check your credit history and income; but they will base the loan amount on the estimated rental income of the property in question.

It is important to find the right lender for you as lenders will vary their criteria and some even offer incentives such as using the rental income as a form of top slicing (see below for more info. It would be worth seeking the help of a Mortgage Broker to assist in finding the right options for your circumstance.

It is also important to know that some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

What things should you consider when investing in a Buy to Let mortgage if you are Self-Employed?

Buy to Let mortgages are a great way to be able to invest in property but there are things you need to consider. If you are Self-Employed you are going to need to prepare all of your documents again like you did for your residential mortgage to prove your income.

You need to ensure you can afford to make the repayments on the Buy to Let mortgage yourself as when the property is vacant, you will still need to make payments. You also need to ensure that you pick the right tenants and ensure you protect yourself with landlord insurance too – this is not mandatory.

The location in which you are investing will be a huge factor to consider, there needs to be a good rental market to heighten your chances of always having tenants occupying the property.

Should I apply for a Buy to Let as an individual or as a Limited Company?

There are more and more Self-Employed people opting to invest in Buy to Lets as a Limited Company as opposed to applying as an individual who is Self-Employed. The reason for this is because of the changes in tax deductions, as an individual you can no longer deduct interest paid on your Buy to Let mortgage but you still can as a Limited Company.

The way in which you approach your mortgage application will be specific to you and your current situation. A qualified Mortgage Broker can help you find the right lender and help ensure you are getting the most out of your mortgage through helping with the application process too.

What is an SPV?

SPV stands for Special Purpose Vehicle which is usually a subsidiary of a parent company created to minimise financial risk. People will use SPV’s to ensure that they have some revenue secure and set aside from the parent company.

Some people will set up an SPV purely for their Buy to Let properties. It can be a tax efficient way of investing but to find out the way for you specifically you should speak to a Mortgage Broker and a chartered accountant.

What is top-slicing?

Top slicing is a term used for when lenders allow you to use your personal income as a way to top up any shortfall in rent after the affordability check. As mentioned before, lenders will base the loan amount upon the amount of estimated rental income of the property you are investing in. If a lender doesn’t offer you the loan amount you wish to obtain you can opt to use your own personal income to top slice or top up the amount the rent does not cover.

How will my income be assessed for a Buy to Let as a Self-Employed worker?

Lenders will want to look into your income so you will need to make sure you can provide them with your SA302 forms and tax overviews. Many lenders will want to see that you have a stable income and that you are earning at least £25,000. There are some mortgage lenders that have no minimum income requirement. However, they may ask to see how you will sustain your own daily living costs and possible rental voids.

How can a Mortgage Advice Centre broker help me?

As someone who wants to invest, we will take care to invest time into you and help you with your Buy to Let mortgage application.

There are a range of mortgage lenders out there who are more than happy to take on Self-Employed applicants, there are even options if your credit score isn’t that high. Get in touch with a member of Mortgage Advice Centre to start your journey into the Self-Employed mortgage market. 


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