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Mortgages are loans which are intended to help buyers purchase residential and commercial property. When an individual takes out a loan, the lender charges interest: the same is true of a mortgage.
A mortgage is a ‘secured’ loan, which means that the loan is secured against the value of the property being purchased until the mortgage is paid off. Sources of residential mortgages include high street banks, building societies and other types of less well known financial institutions.
The main purpose of Life Assurance is to provide money for those people who may depend on you financially, in the event that something should happen to you.
It can provide the reassurance of financial protection for you, your family and your business associates.
A Life Assurance policy pays out a sum of money when the person who is covered by the plan dies.
Health Insurance is probably one of the most important types of insurance you can own. Without it, an illness or accident can have serious long-term financial implications for you and your family.
Most people will be aware that Health Insurance can cover the cost of private medical treatment for any acute conditions you may suffer in the future - from something as simple as a broken bone to more serious conditions like a heart attack or cancer.
Buy-to-let (BTL) mortgages are specifically for individuals who wish to buy residential property which they intend renting to tenants. Although a BTL mortgage is similar in a number of respects to a standard residential mortgage, there are some significant differences between the two.
Most banks and building societies (and some other financial institutions) offer BTL mortgages, but terms, conditions and costs vary enormously.
Some mortgage providers will not lend to individuals who are under 25 years of age or earn less than £25,000 a year. Lenders may impose an ‘upper’ age limit on the term of the mortgage by insisting that the mortgage is repaid in full before the borrower reaches a certain age — 70 is not untypical.
Flats, newly built property, former local authority-owned properties — or properties which are priced below a certain value — can be unacceptable to lenders. Lenders may also restrict the number of BTL mortgages a borrower can have with them at any one time. Or the lender may impose a ‘cap’ on the total amount of BTL funding they are prepared to advance to a borrower.
In common with a standard residential mortgage, the potential lender will take account of your personal credit rating. If you have any unpaid debts, County Court Judgements — or you have failed to make previous or existing loan repayments on time — the lender may not want to take you on as a BTL borrower.
When considering their decision to make an advance or not, lenders will also take into account the amount of rent the borrower is hoping to realise from the property. Unlike a standard residential mortgage, most lenders view the property’s rental potential — rather than the borrower’s salary — as the primary source of income for servicing the loan.
For that reason, BTL lenders like to see a situation where the rental income covers at least 125% of the monthly interest payment. In other words, if your monthly mortgage payment is £1,000, the monthly rent should be a minimum of £1,250. (The borrower’s projections in terms of rental income must be verified by an independent source.) The difference between the two figures should help you meet your mortgage repayments when no rent is being received, or when repairs need making to the property.
Typically, the highest loan-to-value (LTV) mortgage available on a BTL basis is 75% — i.e. you will need a deposit of at least 25% of the property’s purchase price to proceed. Borrowers who are able to put down substantially more than the minimum 25% deposit (40%+ for example) will usually qualify for more favourable rates of interest.
Because BTL mortgages represent more of a risk for lenders than standard residential mortgages, BTL borrowers tend to be charged higher rates of interest.
Survey: A surveyor will be appointed (at the borrower’s expense) to assess the property’s condition, market value and potential rental income. The surveyor will also identify any issues which could affect the property’s future value.
Conveyance: Conveyancing — which is usually conducted by a solicitor or conveyancer — is the process by which the ownership (legal title) of the property is transferred from the seller to the buyer. The seller pays for this cost.
Stamp Duty for Buy-to-let property: The purchaser may have to pay stamp duty land tax which is calculated as a percentage of the purchase price of the property — see the table below for the 2020/21 tax year.
Property price | Stamp duty rate |
---|---|
£0 – £500,000 | 3% |
£500,001 – £925,000 | 8% |
£925,001 – £1.5m | 13% |
Over £1.5m | 15% |
If the property price is less than £40,000 then there is no stamp duty payable.
Other costs: The borrower may also have to pay arrangement and booking fees to the mortgage provider, which tend to be higher than those associated with a standard residential mortgage. It may be possible to include some or all of those fees in the advance.
Depending on the lender, the types of mortgages available to the BTL borrower are usually the same as those available to the standard residential mortgage borrower — i.e., tracker, discount, fixed rate, capped rate and variable rate.
Given that most BTL borrowers buy for reasons of investment, some mortgage options may be more appropriate than others. With a fixed-rate mortgage for example, the borrower knows exactly what their monthly repayments are going to be; other borrowers prefer tracker or variable rate loans where the monthly repayment can sometimes be lower, but the cost can vary from one month to the next.
(Many BTL buyers have a preference for interest only mortgages, as distinct to a capital and interest repayment mortgage. An interest only mortgage, is a mortgage where the monthly repayment is used solely to pay off the interest on the loan but none of the capital, which is repaid only when the property is sold.)
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST FORMS OF BUY TO LET MORTGAGE.
A MORTGAGE IS A LOAN SECURED AGAINST YOUR PROPERTY. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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Purely Financial Planning LTD is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.
PRIMIS Mortgage Network is a trading name of the following companies which are registered in England and Wales, and are authorised and regulated by the Financial Conduct Authority: Advance Mortgage Funding Limited (Co. No: 2217569 ) (FCA No: 305008); First Complete Limited (Co. No: 05416236 ) (FCA No.: 435779); and Personal Touch Financial Services Limited (Co. No.: 03406454) (FCA No.: 187834).
Registered Office Addresses: Advance Mortgage Funding Limited and First Complete Limited: Newcastle House, Albany Court, Newcastle Business Park, Newcastle upon Tyne, NE4 7YB; Personal Touch Financial Services Limited: 2nd Floor, Gateway 2, Holgate Park Drive, York, YO26 4GB.
Purely Financial Planning Ltd is registered in England and Wales under registration number: 8474750. Registered Office: Hersham Technology Park, Molesey Road, Walton-on-Thames, Surrey, England, KT12 4RZ T: 01932 213055
The guidance provided within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
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I just wanted to say a big thank you on behalf of myself and John for sorting out our mortgage. You made the process so straight forward and smooth and found the perfect mortgage for us!
We have always dreaded when our mortgage deal comes to an end as it involves lots of stressful research and paperwork!!
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I was referred to Purely Financial as i was seeking a mortgage for myself and for my wife. Andrew was quick to respond and very informative of the products available. He drove to meet us in Guildford and instantly put our minds at ease. He helped us and guided us to a product that we were very happy with. The knowledge that the whole team at Purely financial have is second to none and really puts them in my eyes, head and shoulders above anyone else that we spoke to. From start to finish the Purely financial team were brilliant and I have since recommended them to several friends and I shall continue to use them in the future
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Purely Financial Planning Ltd
Technology Park
Molesey Road
Walton-on-Thames
Surrey
KT12 4RZ
T: 01932 213055
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