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chrisrush

Best Way To Secure 1st Buy To Let Mortgage

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In the next few months I will have a £75,000 pot of money to start buy to let investing. I intend to purchase 3 properties with this pot of money (probably spread over a 6-18month period). I also intend to place a 25% deposit on each of these properties and borrow 75%. I have a number of individual circumstances surrounding this that I need advice on so I can work out the best way to proceed.

Myself and my partner are both higher rate tax payers and therefore satisfying the initial borrowing criteria of income >£25k pa will be fine. However my intention is to step away from my job in the next 9 months and although I will continue to work in some form it maybe very part time, definitely have me in the lower rate tax payer bracket and is unlikely to provide an income that satisfies the >£25k pa figure.

It appears that the best way to proceed and apply for a buy to let mortgage (as a joint application with my wife who will continue to be a higher rate tax payer) would be beneficial from a mortgage point of view but negative from a tax paying point of view. 

With all this in mind I wondered if the following plan would work (which is focused on minimising tax on interest payments) in terms of securing buy to let mortgages.

1. Apply and purchase 1st buy to let property in my name whilst I am still earning my current salary (say before April 2021).

2. Apply and purchase 2nd buy to let property in my name whilst out of current employment (say December 2021) and earning a low salary (e.g. £15,000 pa)

3. Do same as point 2 but in April 2022

Ideally I want to do this all in my name because of the tax benefits of me having such a low salary once leaving employment however I guess my main question is would doing that and not a joint application with my wife hinder me in securing a buy to let mortgage.

I will be looking to use a mortgage broker but just interested in some initial advice from you knowledgeable souls.

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No expert here, but I've recently taken out a BTL mortgage through a broker. I work part-time, have a fluctuating income and earn less than £25k, and although I had to show my payslips etc, the broker stated that there was no minimum income limit. 

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Hi Chris

Quite a few lenders dont have a minimum income criteria and as long as you have some income to support your current commitments they will be happy to proceed. 
The BTL is assessed on its ability to stand on its own two feet - ie comfortably servicing any loan repayments from the rental income.
Securing a mortgage due to the income change should not be an issue. 

Regards the investment plan/strategies there is also a fourth option to consider and that is to set up a new SPV limited company and purchase the properties via this entity. This could be beneficial especially if you plan to grow a portfolio as companies have a more favourable tax structure than individuals. 

I would strongly suggest you speak to a tax adviser and crunch the numbers to see which would be the best way of moving forward with your plans. 

Regards

Kirsty

 


Property investor ¦ Commercial Finance Broker ¦ Ex banker with 20 years lending experience. 

Commercial Lending Manager at Real Finance Ltd - www.realfinance.co.uk
Happy to discuss any queries regarding property finance for  BTL, HMO, MUB, Commercial, Bridging & Development.  

kirsty@realfinance.co.uk
07494949852

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On 7/20/2020 at 9:37 AM, kirsty_c said:

Quite a few lenders dont have a minimum income criteria and as long as you have some income to support your current commitments they will be happy to proceed. 

I have a similar question, but to do with owning a residential home. Is this really a necessary? Or will lenders still be happy to lend? I earn over the 25k mark, but I’m worried not owning my own home will stop me in my tracks to purchasing my first BTL (which will be through a LTD company)

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On 8/2/2020 at 12:00 AM, meighy said:

I have a similar question, but to do with owning a residential home. Is this really a necessary? Or will lenders still be happy to lend? I earn over the 25k mark, but I’m worried not owning my own home will stop me in my tracks to purchasing my first BTL (which will be through a LTD company)

Some lenders have it in their criteria that you must be a homeowner to apply for their BTL products.

Others lenders arent too bothered (they will usually ask why you are purchasing BTL rather than your own home but this is usually easy to cover with the underwriters)

So in all it may narrow down the options a little but certainly not impossible. 


Property investor ¦ Commercial Finance Broker ¦ Ex banker with 20 years lending experience. 

Commercial Lending Manager at Real Finance Ltd - www.realfinance.co.uk
Happy to discuss any queries regarding property finance for  BTL, HMO, MUB, Commercial, Bridging & Development.  

kirsty@realfinance.co.uk
07494949852

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