Buy to Let Mortgages for the Self-Employed

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What is a self-employed Buy to Let mortgage? 

Buy to Let mortgages are used to purchase properties for the sole purpose of rental. They are structured exactly the same, whether or not the applicant is self-employed with the vast majority of lenders accepting both employed and self-employed applicants.

Some of the main factors that are unique to Buy to Let mortgages are:

  • They can be interest-only products, meaning the entire loan will still be outstanding at the end of the mortgage term
  • This type of mortgage is not regulated by the Financial Conduct Authority unless you only intend to rent to close family members
  • Buyers are not legally allowed to live in their own Buy to Let property, even in the short term
  • The loan is based on the potential rental yield (income) of the property, not your personal affordability

Can I get a Buy to Let mortgage if I’m self-employed?

It’s perfectly possible for self-employed applicants to get a Buy to Let mortgage, and with less focus on income, it can actually be easier than getting a mortgage for your own home.

There are a range of other potential acceptance criteria that you may have to meet for this type of mortgage, however, they do vary from lender to lender:

  • You usually need to own a residential home before applying for a Buy to Let property
  • Some lenders have a minimum income requirement of £25,000
  • Lenders may prefer you to have prior landlord experience
  • You’re likely to need a good credit score

How much deposit will I need?

There is usually a minimum deposit requirement of at least 25% for a Buy to Let mortgage, although a small number of lenders are willing to accept as little as 15%. 

Whilst this is a substantial investment, it may be possible to utilise equity in your residential home or any other rental properties. We can advise you about the potential options in this area, however, it’s a good idea to seek financial advice if you are a business owner.

How much can I borrow if I’m self-employed?

The good news is, as the loan is based on the rental yield of the property you are buying, being self-employed will not factor into the size of your loan. The amount you can borrow will therefore depend on the value of the property you’re looking to buy.

It is important to note, however, that most Mortgage Lenders will expect your chosen property to have the potential to achieve an income equal to at least 125-145% of the mortgage repayments.

Can I convert my mortgage to Buy to Let?

Anyone can potentially convert their Standard Residential Mortgage into a Buy to Let, so long as they meet the acceptance criteria of the lender. 

Do you need to prove your income for a Buy to Let mortgage?

How far you will need to go to prove your income will depend on the lender and whether or not they have minimum income requirements in their criteria. 

As a self-employed person, the way that you prove your income for any type of mortgage application will differ, based on your trading style. Those who are asked to prove their income will usually need to supply two to three years’ accounts, as well as HMRC tax calculations and overviews.

What are the tax benefits and implications?

If you’re a basic-rate taxpayer, it may be possible to write off some of the costs involved with property rental, such as repairs and maintenance on your tax return. 

The tax implications associated with Buy to Let properties are:

  • Income Tax is due on rental income and profits of property sale
  • Capital Gains Tax is due when you sell the property
  • An additional 3% Stamp Duty is due per property you own above the value of £40,000 (aside from your own home)

How can First Thought Financial Services help you?

Here at First Thought Financial Services, we specialise in helping self-employed applicants, so whether you’re looking to invest in your first Buy to Let property or are an experienced portfolio landlord, our Mortgage Brokers can cater to your needs.

Having access to the whole of the mortgage market means that we can find the most competitive Buy to Let deal for you, whatever your circumstances. We’ll streamline the process for you by taking on the administrative aspects of your application and keeping you updated with the progress throughout.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. The Financial Conduct Authority does not regulate most Buy to Let Mortgages. 

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If you are looking for a mortgage or life insurance, call us today on 01923 606808 or complete our short enquiry form here. We’ll be pleased to help you.