Buy to let mortgages
- Become a first-time landlord or build your property portfolio with a buy to let mortgage Access competitive buy to let rates with just 25% deposit Your mortgage will be based on rental yield rather than personal income We can have your mortgage sewn up in 4 to 6 weeks
ContractorMoney are able to offer ContractorUK visitors, tailored mortgage solutions to enable hassle free investment into the rental property market.
Contractors have increasingly woken up to the longer term profit potential and ongoing income opportunities afforded by the buy to let market, as a result of:
1. Volatile stock market investments.
2. Poor returns on your cash deposits due to historically low interest rates.
3. Disillusionment with pensions following various mis-selling scandals, government intervention in the form of taxes on dividends that have wiped £5billion pa from pension funds, poor returns and high charges offered by some providers and a general feeling that as a vehicle for retirement income, pensions are too inflexible.
4. The meteoric rise in property values through the noughties and the associated opportunities to 'gear' your exposure to the market via mortgage finance.
5. The prospect of an ongoing rental income when/if contract income ceases.
6. The tax breaks afforded by rental income over other investment returns.
7. The chance to fix at current low mortgage rates to accentuate any future inflationary upturn.
Investment in residential property for rental used to be almost exclusively the preserve of the already wealthy or local authorities but thanks to innovative mortgage products the emphasis has very much moved over to the entrepreneurial 'man and woman in the street' who have been making this market their own.
ContractorMoney have a huge amount of experience in this field and will be able to secure you the funding that you need without your contractor status becoming an issue.
Find out more with our FAQs and then fill in one of our mortgage finders for more tailored recommendations.
Q. How much can I borrow to fund a buy to let property purchase?
A. ContractorMoney has access to schemes based almost entirely on the rental income that your purchase can be expected to generate (ie we would only need to show minimal proof of your income). The only limit on what you can borrow is that most lenders will require that the expected rent covers between 125 or 130% of the mortgage payments - based on an interest only loan, not repayment, basis. We avoid the lenders' poorly trained branch staff and ensure that your application is processed by key personnel at the lenders' centralised admin units who understand our requirements and who are sympathetic to your contractor status.
Q. Can I buy a second home rather than a rental property?
A. This has been a huge area for contractors who have wanted to get away from it all at weekends. We have mortgage schemes specially tailored for contractors allowing you to take full advantage of the rise of buy to let mortgages to secure a second home without the need to justify that your own income can support both loans.
Q. I want to move but can't/don't want to sell my current home.
A. 'Let to buy' is the ideal solution if you're unable to sell your current house (maybe it needs updating to realise its full potential, perhaps it's proving slow to sell at the right price or possibly you've lost a buyer but still want to complete your purchase). ContractorMoney can arrange a buy to let loan on your current property to release the deposit on your new purchase.
Q. I have an existing rental property. Can I release some of the profit made from my house?
A. We can arrange a fees free (ie the new lender pays all or part of the costs) re-mortgage to allow you to switch to an alternative scheme and release some of the equity in your rental property/home at the same time. In this way a larger loan may even cost you less than the existing one because we will look at the whole market for a competitive rate! Funds can be used for any purpose - a deposit on a further buy to let property, debt consolidation, tax bill, business venture, investment etc..
Q. Will I have to pay a higher interest rate than on a residential mortgage?
A. Marginally higher interest rates are the norm with 'buy to let' mortgages to account for the perception by the lenders that they are somewhat less secure than a loan secured on the roof over your own head.
Q. Do I need a deposit?
A. 25% deposit will secure you options with a range of lenders and will obviously allow you to potentially build up a property portfolio quicker as you're using more of the banks money than your own.
Q. How long do I need to have been contracting?
A. We have the ability to arrange a buy to let mortgage within a week of you starting your first contract.
Q. How long do I need to have remaining on my contract?
A. As a buy to let loan is based largely on the rental income alone the length of contract is largely academic.
Q. How long does the mortgage process take?
A. Depending on which lender we both agree is best for your circumstances we can have approval of your loan within minutes. Once the survey has been done and the necessary legal searches performed by your solicitor the buying process
generally takes 3-6 weeks.
Q. What supporting documentation will I need to provide?
A. We would ordinarily need proof your existing mortgage is paid up to date and ID. A rental assessment on the new property from a letting agent would be useful in terms of initial underwriting.
Q. What costs will I need to find?
A. As we charge no brokers fee to ContractorUK visitors the only costs will be valuation and legal fees and sometimes an arrangement fee to book a particular interest rate. Often we can secure schemes where the lender will pay some of these fees for you as an incentive. If you chose to employ a management agent to administer your buy to let and vet tenants etc they will typically charge between 10 and 20% of the rental income.
Q. What is a mortgage indemnity and will I have to pay it?
A. Indemnity premiums are a hefty fee that many lenders will charge you if you're unable to put down a large enough deposit. This protects them (not you) against your defaulting on the loan and leaving them a debt higher than the value of the house. ContractorMoney will always attempt to avoid lenders that charge this costly fee.
Q Will I have to accept costly loyalty clauses to secure a mortgage?
A We pride ourselves on always securing you competitive interest rates whilst avoiding schemes that feature stings in the tail. Too many contractors have been tempted by lenders offering a low headline-grabbing rate only to find that they suffer long periods at higher rates with penalties that are charged if you attempt to break free. We can recommend a competitive selection of schemes that will allow you complete freedom to move your borrowing at any time or at the very least allow that freedom as soon as your current rate expires- allowing you to move onto the next good rate as soon as this one ends.
Q. What will happen to my mortgage rate after the initial scheme expires.
A. Too many people allow inertia to set in once an initially competitive interest rate expires. We will be in touch 2 months before the expiry of any special rate that you may be on so that we can explore the options available if you. We will look at what is on offer from the current lender and compare this with what is available elsewhere in the market. If appropriate we can often arrange a new lender to pay fees to move your loan across to their schemes. In this way ContractorMoney will be on hand to keep an eye on future market conditions and will help to ensure that you secure a competitive interest rates throughout the life of your mortgage.
Q. Shall I 'buy to let' personally or via my limited company.
A. Mortgages for company ownership have become far tougher to secure now and this question is one for your accountants although generally speaking if this is your first property then its likely that holding the investment personally will be the route to take. The lenders that do sometimes allow company borrowing would need you to set up a standalone company purely as a vehicle for the property investment rather than tag this venture on the side of your existing one man limited company.
Q. If I do go down the company route can I still take out a 'residential' mortgage or do I need to look at costly 'commercial' borrowing.
A. ContractorMoney have access to limited company loans from time to time at residential rates so you need pay no premium in terms of interest rates to you follow this route.
Q. My main mortgage is a repayment loan. Shall I go interest only or repayment on this new purchase?
A. There are few tax breaks on your main residential property now thanks to successive cuts in tax breaks and the abolition of MIRAS relief. Bizarrely the chancellor will, however, allow you to offset interest paid on your buy to let mortgage against rent received, so reducing the income tax that you pay on the profit. Paradoxically it could be argued that keeping the borrowing high on the rental property for as long as possible via an interest only loan, whilst paying off the residential mortgage more quickly via overpayments could be the most tax efficient way to structure things. Once the main residential loan was settled you could then turn your full attention to the rental mortgage.
Q. Will I need to take out compulsory insurances with my mortgage?
A. You will need to put specialist home insurance in place that allows you to let out the property but more generally we will always try and ensure that there are no hidden shocks when we make a mortgage recommendation to you. We will avoid schemes that insist on you taking out uncompetitive home insurance etc. We also avoid lenders that insist that you must take out life cover although as IFAs we would always recommend that your debt is properly protected and will be happy to provide no obligation advice on this subject.
Click here to see what options may be available to you.
The value of investments may fall as well as rise and past performance is not a guide to future returns.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Financial advice is given by ContractorMoney, which is a trading name of Contractor Financials Ltd and is regulated and authorised by the Financial Conduct Authority.Source: www.contractoruk.com