Buy-to-let

Can you explain how remortgaging works for a Buy to Let property?

The key time is when your deal’s coming to an end – when if you do nothing, you will jump onto a lender’s standard variable rate. It’s always worth considering a remortgage when your product is ending. 

You can look at other options, such as borrowing more. If the property price has gone up and the rent’s gone up, you might decide to buy another property. We’ve helped many landlords borrow as property prices have risen. 

Obviously that doesn’t necessarily always happen, or it can be much slower. But we’ve helped people go from one property over the years to three, four, five or six, just by helping them remortgage, take some money out, buy another property or do up existing properties.  

It’s a good thing to have a conversation about when your interest rates are coming to an end and you’re not sure what to do next.

Are there any restrictions on using a Buy to Let mortgage for properties in certain areas or for specific tenant types?

Yes – again that list can be quite long. You might struggle if you’re trying to buy a property in very close proximity to a university, but you’re looking to let it to a standard family. The lender might not necessarily think that’s a great investment. 

Similarly, if you’re looking to rent out a house of multiple occupancy for six unrelated people on a residential street. They might feel that doesn’t really make sense. Sometimes high-rise blocks can be a challenge, and you tend to need a more niche lender for that. 

In terms of tenant types, most lenders are relatively inclusive. That’s not a major issue, to be honest. In certain areas you might start getting into the realms of houses of multiple occupancy. But a good advisor would point you in the right direction, especially if they know their locality.

What are the potential risks involved in investing in Buy to Let properties?

I touched on one of the major ones. A lot of landlords worry about rental voids. A property could be empty for a certain amount of time, due to market conditions, or because you’ve had to renovate the property after a bad tenant. If a tenant has left it in a poor state of repair, of course the bill is ultimately going to be yours. 

Another one of course is property prices. More people are willing to ride out ups and downs in house prices when it’s your home. You’re going to keep paying for it and hope that one day you’ve made some money from it. 

But when it’s an investment, you’re really hoping it’s going up in value as well. If house prices dip, you might end up getting back less money than you originally put in, especially if you decide to sell in the short term. 

Property is not very liquid – it’s not easy to get your hands on the cash and you’re tying up a lot of capital for the mid to long term. Shorter term, it can be done, but it’s a more expensive way to borrow and of course the risks are even higher.

Can you provide some insights into the current trends and market outlook for Buy to Let properties in the UK?

That’s a difficult one – we have noticed a general slowdown in people buying right now, in November 2023. We did have a huge influx only a couple of years ago, when rates were very low. 

A lot of landlords stood to make a very tidy profit on the monthly rent against their monthly mortgage payment – so it completely made sense. Of course, house prices were going up and up, so they were winning twofold. Now, because things have slowed down and rates are higher, those margins are much finer. 

People aren’t sure whether they really want to invest in property right now. But in my opinion  I think rates could start to stabilise. They already have started to show signs of that. We are seeing more Buy to Let enquiries, even if they’re a bit more tentative.

People are coming in and asking questions about costs and whether their plan is achievable. Hopefully going forward we will see more people getting back into the property market.

Are there any government schemes or support available specifically for Buy to Let investors? 

No – the government is more focused on helping people buy their own home, completely understandably. When people own their own home they are in a much better position than renting forever. At the moment everything is pointed in that direction, and I think that’s probably the right way to go.

What’s the importance of property management and how does it impact Buy to Let mortgages?

Looking after your property is major – otherwise a mortgage lender could in theory try and ask for the money back. It’s normally in your mortgage terms and conditions that you have to keep the property in a good state of repair. 

Your buildings insurance would also stipulate that – it’s an important factor. So managing your property is very key. If you’ve got a large portfolio, it can affect your ability to borrow if you’ve got properties that aren’t looked after. 

I hate to use the term, but you see ‘slum landlords’ mentioned in the media. A mortgage lender will not want to be party to something where a tenant is living in substandard conditions. 

So look after your properties and your tenants will do the same. If it looks good and it is a nice place to live, your tenants will look after it, and that looks after you.

What are the consequences of defaulting on a Buy to Let mortgage?

Lenders are less likely to be as forgiving as with residential. If you default on a Buy to Let they’re going to try to become the rent receiver. They might try to collect the rent on your behalf and not give it to you. They’re going to take it to cover their risk and their mortgage payments. 

If they put someone in place to collect that rent, and ultimately repossess the property, your credit score would potentially be ruined. You might never be able to buy again and you could struggle to remortgage your own property. 

Any default is considered a very bad thing, whether it’s on Buy to Let or residential. The consequences are massive and will affect you for years to come.

How can I add additional properties to an existing Buy to let portfolio?

You can do it in a multitude of ways. Mortgage lenders normally class anything over three as a portfolio. As a portfolio landlord, you will either have a limited company and buy your properties that way, or own them in personal names. 

Often people borrow against current properties. So when a rate is up for renewal and you decide to remortgage, you borrow additional funds to go and buy more properties. Within that process you’d have solicitors, a mortgage advisor and obviously lots of other people involved. 

What steps should a first time Buy to Let investor take before applying for a mortgage?

Speak to your advisor and get a good handle on the kind of landlord you want to be. I don’t mean good or bad, obviously, because that’s a terrible decision to make! But it helps to be clear about the kind of properties you want to let out and how many you want in future.

A lot of lenders prefer you to start with a standard let property, purely to get some experience of looking after tenants and managing a property etc. As you can imagine, it’s a lot more work to manage a property with five separate tenants – you’ve potentially got five different agreements, with people potentially paying different amounts if the rooms are various sizes. 

The first step is to make sure you’ve got a good deposit. Speaking to your advisor is key – we can give you an idea of suitable deals and how much you can potentially borrow on the properties you’re looking at. 

Have a chat to some agents locally about whether these properties rent easily. The last thing you want is to get your fingers burned buying a property no one wants to rent. Always ask for guidance if you’re unsure about anything.

Your property may be repossessed if you do not keep up with your mortgage repayments. 

The Financial Conduct Authority does not regulate most Buy to Let Mortgages.