Buy to Let mortgages are a great way to diversify investment or supplement pension income with regular rental contributions.
Recent years have seen low-interest rates which have made the buy to let mortgages much more attractive, especially when compared to other types of investments. Strong rental markets, particularly in university towns and cities, and low-interest rates have resulted in an increase in the number of investors wanting to add property ownership to their portfolios. Buy to Let mortgages are a great way to diversify investment or supplement pension income with regular rental contributions. It is important to seek independent tax advice when looking to invest in the buy to let market.
British Columbia investors are seeing a wealth of new products being developed to meet their increasing needs, by lenders who are looking to grab a larger market share of this growing sector. These products include deals that have been specifically tailored by lenders to suit first-time landlords, limited companies, properties in need of light refurbishment, and Houses of Multiple Occupancy. Some Buy to Let mortgages are now being offered on deals up to 85% for both purchases and remortgages.
Choosing the right Buy to Let mortgage broker is an important part of choosing to invest in property. Our specialist advisers have access to:
Choosing the right mortgage deal has become an increasingly complex task, especially for first-time investors, with thousands of competing products and rental or lending criteria to choose from.
Here at suncapitalists.com -Mortgage Broker, we will search for the right mortgage based on your circumstances. Get FREE, no-obligation professional advice and quotes from our expert advisers in a matter of minutes.
Please note: Buy to let agreements are not regulated by the Financial Conduct Authority. There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
There is no mortgage product known as a ‘portfolio mortgage’, nor are there specific mortgage products aimed at Portfolio Landlords. Portfolio Landlords use standard Buy to Let mortgages, much like any other landlord?The differences lie in the mortgage application process. There is less availability given that there are fewer lenders offering mortgages to Portfolio Landlords. They are also more difficult to attain, given stricter lending criteria.
What is a Portfolio Landlord?
Portfolio Landlords are those who own four or more mortgaged properties. Whilst in the past Portfolio Landlords may have had access to aggregate lending, which would allow them to combine and manage all of their Buy to Let property mortgages together, this option is no longer available.
There is no maximum number of properties a Portfolio Landlord can own, however, mortgage options will reduce as the portfolio increases, particularly for those who own more than ten properties.
Who can get a Buy to Let Mortgage?
When considering your application for a Buy to Let mortgage, the lender will ask for details about the rental property and how you intend to let it. If your intention is a student property investment, the criteria are likely to be more focused on your own landlord experience, than they would if your intentions were for a single occupancy property.
Exact criteria will vary from lender to lender, but the majority of lenders will require that you:
Own your own residential property
Have an income of at least $25,000
A deposit of 25% or more
Are able to complete the mortgage before the age of seventy
Have prior landlord experience – whilst flexible for those taking on sole tenant properties, you are unlikely to be approved for a Buy to Let mortgage on a student property without experience
How do Buy to Let Mortgages work with more than one tenant?
Whilst the actual terms of the mortgage itself works will not differ, the lending criteria will. Where you’re buying an HMO (House of Multiple Occupancy) properties, your loan offer will be calculated on the rent you can achieve on a room-by-room basis, rather than on the property as a whole.
In some circumstances, this may mean that you can achieve a higher loan to value amount, as student lets have the potential to be more profitable than single occupancy properties. This will very much depend on the individual property, however.
How much can you borrow for a Student Buy to Let Mortgage?
When buying a property to be used as student accommodation the loan amount will be based on a variety of factors. Much like a standard Buy to Let mortgage, the lender will predominantly look at the potential income, in this case, however, on a room-by-room basis, rather than the property as a whole. As such it’s impossible to suggest an average loan amount, as this will very much depend on your chosen property and its rental potential.
There would also be a stress test of your own personal income to ensure that you are able to maintain payments under a change in circumstances, for example, a rise in mortgage interest or as we’ve seen recently, long-term vacancy of the property due to Coronavirus.
The criteria of the stress test will vary from lender to lender, but also depending on your own tax bracket and the duration of your fixed interest rate.
What should you do when students are not around?
As with any mortgage, it will need to be paid regardless of the circumstances, so for Buy to Let mortgages, that means through periods of vacancy. You would therefore need to prove that you had the means in place to pay the mortgage in these circumstances.
Whether letting out a converted student house or purpose-built student accommodation, student lettings are usually based on 11 monthly payments, rather than the academic year. This means that students are aware of the need to pay even when they are not in situ.
Most landlords use August to refurbish the property in order to re-let it for the following year. This should be taken into consideration when financial planning, as well as the frequent advertising or property management costs involved with letting properties to short-term tenants..
What else should I be aware of when investing in student accommodation?
Whilst logic would seem to dictate that more room to let means a higher profit margin, this is not necessarily true when tax liabilities are considered. Income tax will be due on all rental income as well as both capital gains and income tax, should you decide to sell the property.
When you own more than one property, stamp duty will be significantly higher on the additional properties, so this should also be considered carefully.
You should also be aware that tenancy agreements will need to be amended to accommodate multiple tenants as each individual tenant needs to agree to the contract terms.
How can suncapitalists.com -Mortgage Broker help you get a Buy to Let loan?
Many lenders prefer to deal with mortgage brokers for Buy to Let mortgages, rather than the public. This is especially true, the larger your portfolio of properties. Consequently, applying via a broker would give you access to significantly more competitive mortgage deals than applying directly.
Why use The suncapitalists.com -Mortgage Broker?
At The suncapitalists.com -Mortgage Broker, it’s our vision to become CANADA’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to every one of our clients.
From your first call to your last, we put customer service first before all else so you can be
confident in getting expert mortgage advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We offer FREE no-obligation advice with no hidden costs. Payment is only taken when we proceed with the application. Therefore if we don’t complete any business, the customer never pays a penny.
Buy To Let – Portfolio Mortgages
How do Portfolio Landlords finance their properties?
The Prudential Regulation Authority (PRA) regulates the majority of Buy to Let lenders, introduced stricter underwriting standards for Portfolio Landlords in 2016. This was predominantly due to the changes in tax liability on Buy to Let properties, which meant that those with multiple properties would experience a significant increase in tax liability.
As a result of this, many lenders will no longer offer Buy to Let mortgages to those with a portfolio of more than four properties. Whilst it is slightly more difficult for a Portfolio Landlord to obtain a mortgage, however, they are available. Those lenders who are willing to offer mortgages in these circumstances will require additional documentation in your support of your mortgage application.
This will vary between lenders, but most are likely to need:
Evidence of your experience as a landlord
Mortgages details for all of your buy-to-let properties
Information about all assets and liabilities, including tax liability
Proof of income from your portfolio and any other sources
Evidence of stable cash flow from your current investment properties and expected stability from your future investment property(ies)
Whilst those with a smaller portfolio of less than ten may still find that high street lenders are an option, those with ten or more properties are likely to need to apply to specialist lenders through a mortgage broker.
How much can I borrow as a Portfolio Landlord?
As a Portfolio Landlord, lenders will be more cautious with how much they are willing to lend, than with a non-portfolio borrower. Whereas with standard Buy to Let mortgages, the loan amount is based predominantly on the potential rental yield from the property you wish to buy, with portfolio borrowers, lenders ICR ( Interest Coverage Ratio) across each individual property. As such it is difficult to define standard loan ratios and this will depend on each the profitability of an individual’s current rental properties, as well as their overall financial stability.
Buying through a Limited Corporation or LLC (Limited Liability Company)
Many landlords have realized the tax benefits of financing their Buy to Let properties through a limited company. Particularly those with an existing portfolio of more than four properties may increase the availability of mortgages, given that corporation tax is charged at a lower rate than income tax, meaning lenders can be more flexible with their criteria.
An SPV (Special Purpose Vehicle) can be set up for both individuals or existing limited companies and these are designed solely to deal with your Buy to Let portfolio.
Preparing Your Business Plan
However you choose to apply for a Buy to Let mortgage for the next property in your portfolio, lenders will want to see a substantial business plan. This will need to include information about your full portfolio of properties, including what type of tenants are in situ, plans for property vacancy, and future income potential.
with the application. Therefore if we don’t complete any business, the customer never pays a penny
At The suncapitalists.com, it’s our vision to become CANADA’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to every one of our clients.
From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We offer FREE no-obligation advice with no hidden costs. Payment is only taken when we proceed with the application. Therefore if we don’t complete any business, the customer never pays a penny