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Buy to Let Mortgages for Contractors
You might be worried about getting a Buy to Let Contractor Mortgage. Although there is no specific mortgage product out there for Contractors, there are specialist lenders. There is no reason for you as a Contractor to not invest in property if you are able to and interested in doing so. Below is a guide about what you can expect as a Contractor investing in a Buy to Let.
What are the features of a Buy to Let mortgage?
There are certain criteria that you need to fit in order to gain access to Buy to Let mortgages. The minimum deposit needed for a Buy to Let mortgage is at least 25%. Product fees can be higher on Buy to Let mortgages than they are on standard residential mortgages.
Most lenders will require you to be on a specific income which is usually £25,000 to be accepted onto a Buy to Let product. Some require for you to be an owner of your own home before you can apply too.
The affordability checks are slightly different when it comes to Buy to Let mortgages too, it is based upon the expected rental income rather than your income. Lenders vary with their criteria and you will find that they have different incentives on products too such as allowing you to use rental income as top-slicing.
It is important to find the right lender for your current situation, you should get in touch with a Mortgage Broker to discuss the options available to you.
Factors to consider when considering investing in a Buy to Let mortgage
With great investing comes great responsibility and the decision to take out a Buy to Let mortgage should not be taken lightly. You need to consider the location in which you are buying and what the rental market is like. You need to consider the mortgage interest that you are investing in and that it is right for you to be able to make regular repayments.
You need to ensure that you can cover the repayments on your mortgage if the property is empty and rent isn’t coming in. You will need to find suitable landlord insurance as well as suitable tenants for your property.
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Should I apply for a Buy to Let mortgage as an individual or as a Limited Company?
It is becoming more and more popular to invest through a Limited Company as a Contractor when it comes to Buy to Let mortgage products due to the changes in tax deductions. It is no longer an option to deduct interest paid as an individual but you still can under a Limited Company.
It is hard to say which approach is best as it will depend upon your business and your current financial situation. You should seek help from a Mortgage Broker who can tailor your experience and ensure you are making the most out of your business in regards to your mortgage application.
How is income assessed for a Contractor buying a Buy to Let property?
Lenders tend to look at your SA302 tax calculations as well as your tax overviews. This will give them an idea of your income and how much you contribute towards it too. As mentioned before lenders are more concerned that the rental income
If you have already had a residential mortgage then a lender would have already assessed your income and it will be done in the same way. Lenders sometimes consider annualising daily rate incomes or sometimes ask for an income projection from a chartered accountant. This is when they take your day rate and work out an annual income based on how many days you work a year.
It doesn’t matter if you are in an IR35 contract or not as lenders are not so concerned with what type of contract is being held anymore. This being said, lenders’ criteria do vary and it is always worth checking how their affordability checks work before approaching them.
Tax implications and benefits
Buy to Let mortgages focus on your income tax rate doesn’t make a difference if you are a low or high taxpayer.
Sometimes with fixed deals, there are downsides such as not being able to remortgage easily and switching to a cheaper rate. There are specialist lenders out there which is why it is worth getting in contact with a Mortgage Broker to find them.
How can a First Thought Financial broker help Contractors with Buy to Let Mortgages?
When it comes to Buy to Let mortgages you may think you are limited when it comes to mortgage offers, but we have access to the whole of the market meaning we can access mortgage products that are not available on the high street.
We can listen to your situation and assess how much you can afford to make in mortgage repayments, we can explain all of the interest rates and help with finding a lender that will suit the situation you are currently in.
We are an appointed representative of Quilter Mortgage Planning Limited which is authorised and regulated by the Financial Conduct Authority.
First Thought Financial Brokers are qualified to give the information and advice that you seek.
The Financial Conduct Authority does not regulate commercial buy-to-let mortgages.
As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
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