Fuss free additional property loans

If you’re thinking about expanding your property portfolio but don’t have all the funds you need, an additional property loan can help you bridge that gap. An additional property loan is often used to help with the deposit needed for a buy-to-let mortgage, which is typically 25% of the property’s value.

To be eligible for a buy-to-let mortgage you must:

• Be aware of the risks 
• Own your current home whether outright or with an outstanding mortgage 
• Have a high credit score
• Have a good affordability
• Earn over £25,000 a year 
• You must be no older than 75 years of age when your mortgage ends

Okay, we’ll break it down for you. Buy-to-let (BTL) mortgages are in many ways just like ordinary mortgages, with some key differences:

• Interest rates on buy-to-let mortgages tend to be higher
• The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value. Some lenders do offer deals with a 20% deposit, whereas others want a 40% deposit
• The valuation, legal costs and set up fees tend to be much higher

Most BTL mortgages are interest-only, which means you don’t pay anything off the borrowed amount each month. But instead at the end of the mortgage term you repay the capital in full.

So you’re aware, BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA). The only time it’s regulated by the FCA is when you let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling), then the mortgage is known as a Consumer Buy to Let mortgage.

Great question. The amount you can borrow is linked to the rental income you expect to receive. Lenders typically need the rental income to be 25-30% higher than your mortgage payment.

To find out what your estimated rent might be, go and chat to your local letting agents or check the local press to find out rent charged for similar properties.

A buy-to-let property investment may be right for you if you:

• Prefer investments that feel more tangible than stocks and shares
• Are willing to tie up your money for a long period of time
• Understand property prices can go down as well as up
• Are willing to take the risk that you may not earn a profit on your investment
• Understand and accept the additional risks that go along with borrowing money to buy a property
• Understand and accept the costs and time involved in owning and running a property and the impact that this will have on your potential return

• The amount of rent you can charge varies according to a number of things, including wider market trends outside your control
• If you can’t find tenants, or if you can’t charge the rent you expected, you may not be able to cover your mortgage repayments
• If house prices fall, the value of your property is likely to fall as well. You may not be able to sell it for as much as you hoped
• If you have to sell and the sale price doesn’t cover the whole mortgage, you’ll have to make up the difference
• Unexpected major repairs or difficult tenants may increase your costs and trouble 
• If the housing market does well, you may be able to sell your property for a profit

Most of the big banks and some specialist lenders offer BTL mortgages. But before you take out a buy-to-let mortgage we recommend talking to a mortgage broker, like our partner Cream Financial Solutions, as they’ll be able to help you choose the most suitable deal for you. Another option is to purchase an additional property and get a second charge mortgage, using your existing home as collateral.