All you need to know about BUY TO RENT MORTGAGES

A buy to rent mortgage is a loan taken out on a property with the intention of renting it out. They differ slightly to standard residential mortgages in a number of ways. It may also be worth speaking to an independent mortgage broker to see what the best deals are for you in your particular circumstances.

    

OUR EXPERTISE

GETTING THE BEST BUY TO RENT MORTGAGE DEAL

o get the best buy to rent mortgage deal, you need to shop carefully. Get acquainted with the terms, jargon and language used in the market. You’ll want to keep an eye out for the following things when you’re comparing deals:

– Lender fees and charges

– Low rates

– Loan to value (ltv)

– Mortgage type – fixed rate or variable

LOAN TO VALUE (LTV)

This isn’t complicated – it’s just another way of describing the amount you need to borrow to buy the house – minus the deposit you will put down. So if you want to buy a £250,000 and you have a £100,000 deposit, your LTV will be £150,000. Like any mortgage, the bigger the down payment, the lower the LTV. Most buy to rent mortgages will require a substantially bigger deposit than residential mortgages, so be prepared to look at putting down deposits which are anything from 25% – 40% the value of the property.

FIXED RATE AND VARIABLE

As it described, a fixed rate mortgage will be a fixed rate for an agreed period of time, while a variable rate will fluctuate as the base rate changes. The former gives you a guarantee that the amount you pay will stay fixed for a set amount of time, a variable will fluctuate accordingly – a great option if the base rate is going down.

RATES AND FEES

Introduction fees, early repayment fees, handling fees, arrangement fees – there’s a lot of extra payments you need to be aware of before you settle on a buy to rent mortgage deal. What you will start noticing is that lower rates will come with higher charges, so you need to do the maths and work out whether it constitutes a good deal long term.

"Hip has incredible potential. It brings accessibility and transparency to the property market for owners, occupiers, investors and developers, and allows them to take control and leverage the balance of their debt to equity to their own advantage."

Paul Danks,

Newmark Grubb Knight Frank

“HiP could solve the UK housing crisis”

Peter Bill,

Author of Planet Property

"It’s a game changer, and a very exciting one."

Sophie Eastwood,

Global board director of Young Entrepreneurs in Property (YEP) and founder of specialist property PR consultancy, Holistic

HiP as buy-to-let alternative

HOW CAN HIP HELP WITH MY BUY TO RENT MORTGAGE DEAL?

HiP can help landlords and homeowners with a buy to rent mortgage deal in a number of ways.

We underestand the problems facing buy to rent landlords

One of the biggest problems with getting a buy to rent mortgage is getting a big enough deposit together. When lenders require a 40% down payment, this can run into hundreds of thousands of pounds. Most people’s only way of accessing this type of money is through existing property that they own – either by selling, or by going through a costly remortgage.

But what if there was a better way?

HiP believes that everyone should have access to their property wealth away from the barriers and obstacles that traditional lenders have in place. With our help, you can access your equity quickly and safely, allowing you to make important, financially-smart decisions to progress your future. This equity can either go down as a deposit for a buy to rent, or help repair and maintain existing properties in your portfolio.

So we have decided to reinvent how the world buys and sells property

We also have on hand a large number of investors who are looking to put money into properties like yours. With our investors’ help, you can expand not just the number of properties you own, but also the type of properties you buy – and this doesn’t just work with buy to rent. If you’re looking to upgrade your own home, we can help you climb up the ladder with investment help.

HOW YOU BENEFIT WITH HIP

HiP is the NEW Way
to finance property

HiP Property: Our Aims

Reinvent the way you look at property investment

HiP is hugely beneficial to property owners, changing the way we can use bricks and mortar into something with far more fluidity than ever before. It is a debt and equity exchange, with investors all over the world interested in putting their money into property.

Turn Your Property Into a Bank Account

For you, this means a democratised property market; withdraw money from equity without moving, borrowing or losing ownership, use your equity to cover your monthly mortgage repayments, or trade your equity against your mortgage.

Flexibly in the high-yield property markets without limits

We allow you to do all this, and much more, without the penalties, costs and charges that a traditional lender would impose. Whatever your property investment or finance needs may be, HiP is on hand to help you take your next step.

HiP is regulated by the FCA

HiP UK will be regulated by the FCA*

And have an agreed licence for trading in the UK and Europe. *As we go live these permissions are being reviewed.

HiP is based in London

HiP UK is based in London.

HiP's 20+ staff operate from Camden, London. With registered address in Bristol.

HiP is award winning

HiP is award winning

We have won an awards and been shortlisted for more. We came second in the worldwide PropTech Innovation Awards and as Bronze in the Digital Impact award 2017 for “Best use of digital by sector”.

Register your interest

Just fill out the form on this page now, and you’ll be the first to find out about HiP, which we are busy creating. We can’t wait for you to join the property revolution.

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Frequently Asked Questions

WHAT IS THE LAW AROUND UK BUY-TO-LET MORTGAGES?

It’s well worth finding out about the rules surrounding buy-to- lets before you make the decision to apply. Borrowers are subject to more stringent ‘stress tests’ on their buy to let mortgage applications. According to the Bank of England, this is in a bid to reduce irresponsible lending. Lenders will review your entire portfolio when making a decision on one mortgage application. This has caused problems with those landlords who may have one or two properties underperforming, profit-wise. Even if the rest of your portfolio is more than making up for this small shortfall, it could be detrimental to your mortgage application.

READ MORE

CAN YOU LET A PROPERTY IN THE UK WITHOUT A BUY TO LET MORTGAGE? WILL THE BANK FIND OUT?

If you own a property and rent it out, it is advised that you inform your mortgage lender as soon as possible about this change in circumstances.
Renting out your property on a standard mortgage will be infringement of the legal conditions of your contract, and you could face severe consequences.
Since 2013, banks and lenders have been chasing ‘accidental landlords’ and checking any properties which have been advertised on the rental market without their consent.
Letting your lender know about your wish to let to a third party is easily arranges, and will require you to obtain a ‘consent for lease’ document from your bank.

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CAN I GET A BUY-TO-LET MORTGAGE WHILE I HAVE BAD CREDIT?

They will usually demand a larger deposit and potentially higher rates. It is usually easier to obtain a buy to let mortgage with a less than gleaming credit score than a standard mortgage as you will be covering the mortgage repayments with the rental yield.
However, HiP allows borrowers with bad credit to get on to the buy-to- let ladder far more easily than most traditional lenders.

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How does a buy-to-let mortgage work and are they good?

A buy to let mortgage traditionally works by calculating the rental yield of a property to see if its workable with the mortgage repayments. Once the agreement has been worked out, you’ll pay a deposit to secure the mortgage. During this time, you will find tenants that can fill the property, ideally credit check them and get them to sign a tenancy agreement. They will then cover the cost of the mortgage repayments each month. To make it worthwhile, there should be extra, normally 25% extra, for you to use as profit or invest back into the house on any repairs.

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In the UK, if I get a mortgage, how long do I have to live in the property until I can rent it out?

Depending on the terms and conditions of the mortgage, you can rent the house out at any time. However, some lenders will refuse point blank to change a particular mortgage deal into a buy-to- let, so it is important to read the small print and discuss the possibilities when you take out a standard mortgage.

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Can I buy a property on buy to let and rent it to myself (UK)?

Depending on the terms and conditions of the mortgage, you can rent the house out at any time. However, some lenders will refuse point blank to change a particular mortgage deal into a buy-to- let, so it is important to read the small print and discuss the possibilities when you take out a standard mortgage.

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Is it better to get an interest only or repayment mortgage for a buy to let property?

Most landlords will choose an interest only mortgage over a repayment mortgage for their buy to lets.
The main reason for this is that landlords invariably see their properties as long term investments.
Interest-only mortgages are also flexible and tax-efficient – even though the tax rules on buy to lets is changing.

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The tax regulations around buy-to-let mortgages in the UK changed last year. Is it still profitable to do buy-to-let?

Profound changes to the way buy to let mortgages work have dramatically altered the livelihoods of a lot of property landlords. In 2017, changes to the law made it no longer possible for higher rate taxpayers to offset all their mortgage interest against rental income before working out what tax they owed. This led to higher tax bills, even if their income had not changed.

This is being phased through to 2020, where it will be replaced by a 20 percent tax credit.

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What do banks look for to approve an applicant for a buy to let mortgage?

Banks and lenders will look at a number of things when approving you for a buy-to-let mortgage. These include:
Your credit score
Your income
Your spending habits
Any criminal records

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Can You Get Buy To Let Mortgage As First Time Buyer?

While it’s totally possible to have your first mortgage as a buy-to- let, most lenders prefer borrowers who have had a standard mortgage prior to taking on a buy-to- let mortgage.
If you are approved, you will have to prove that you are not living in your own buy-to- let, and you will also have to pay a bigger deposit and higher rates than a standard mortgage.

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How are repayments calculated in a buy to let mortgage?

Repayments on a buy-to- let all depend on how much you’ve been approved to borrow. Your mortgage will be based on the amount of rental income that the property can expect to bring in.
Repayment amounts will differ from lender to lender, depending on the mortgage deal, but it will be calculated by working out the value of the house and the expected monthly yield from rent.

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