Contractor Mortgages
Mortgages based on hourly/daily rate, we are experts with over 10+ years experience working with contractors.
Here at Connely Roberts Mortgage Services, we offer a range of Buy to Let mortgages to new and existing landlords, including HMO and Limited Company applications.
Contact UsWhether you are an experienced landlord or taking your first step into the buy to let market, an experienced broker is imperative. All of our BTL options can be accessed by contractors and self employed applicants too! There are many things you will need to consider when looking to purchase or remortgage a buy to let property. With hundreds of lenders, all with different lending criteria, it can be a real challenge if you decide to do it alone.
Although some forms of Buy to Let are not regulated by the FCA, we believe it’s important to always have the correct advice. Our process is always fully advised and we will make a recommendation to you based on what we feel is best suited to you and your plans.
For more information, you can find our Buy To Let Guide here.
It’s important to consider what type of Buy to Let property you’re looking for
A personal Buy to Let is a property which is owned in your personal name as opposed to through a Limited Company. Over the past few years we have started to see different ways some lenders are assessing BTL applications.
Stress Testing Rental Income
A more ‘traditional’ way of getting a Buy to Let mortgage. These mortgages are assessed in a very different way compared to a Residential mortgage. Residential mortgages are lent based on what you earn and what you can afford on a monthly basis. With this type of BTL mortgage the lenders assess your application based on your income tax rate and what the property expected rental income is or is likely to be. They then calculate the maximum borrowing amount using an Interest Coverage Ratio (ICR). This is simply what the ratio is between the income and what the mortgage payment would be on a chosen interest rate.
Some mortgage lenders will still require evidence of your personal income in case of any rental voids that could occur.
Affordability Based Lending
Some lenders will assess your BTL application using your personal income as opposed to relying solely on the rental income the property is likely to generate, similar to a residential mortgage application.
They will still need to know what the rental income is likely to be on your chosen property, it’s important to know this before looking at your options.
Top Slicing
Top slicing is something that is becoming more popular in the Buy to Let market. It’s a ‘hybrid’ where if the traditional way of stress testing rental income falls short, they can rely on using your disposable income to bridge the gap.
This is only available with certain lenders and an affordability assessment will need to be completed.
Limited company buy to lets are becoming increasingly popular, mainly due to the tax advantages there are in comparison to owning a personal buy to let. There are pro’s and cons to both routes so it’s important you seek advice from an accountant or tax adviser to establish whether this is the best route for you.
You’ll often find that the application process you go through to apply for a this type of mortgage is very similar to applying for one personally. The lender will require a personal guarantee from any directors of the LTD CO. The lender will still credit score you and are likely to ask for income proof too.
When it comes to the Limited Company BTL, most lenders require this to be applied for in what’s known as an SPV (Special Purpose Vehicle) meaning the company is only going to be buying or renting property. The lenders will require you to have certain SIC codes when setting up the LTD CO. Your accountant will run you through this but the below are the most common:
68100 – Buying and selling of own real estate
68209 – Other letting and operating of own or leased real estate
68320 – Management of real estate on a fee or contract basis
This means that if you already own a Limited Company, for instance a contracting business, it’s unlikely the lender will allow you to purchase the property through this.
Something that is important when considering your options is the difference in interest rates & products when looking at LTD CO vs Personal. The lenders who offer LTD CO mortgages are not highstreet names, therefore you can often find that the interest rates and fees charged are higher.
A HMO property is a property that is rented to a number of unrelated tenants who have their own separate rooms to sleep in but have shared living areas such as a kitchen and bathroom.
HMO properties can be a great source of monthly income but must be done properly. If you’re looking to purchase or remortgage a property that is due to be let on a ‘room by room’ basis then you must apply for a specific HMO product. The lender will usually assess the property’s rental income on an individual room basis and annualise it based on the amount of rooms you’re looking to let.
Usually, when looking at a HMO application the lender will want to see you have ‘landlord experience’. This is normally 12-24 months proving you’ve already owned a BTL property.
We have some clients who will purchase HMO properties in areas popular with students as a rental property to those university students. This is possible with some lenders, although you tend to find the interest rates are higher due to increased risk.
Research must be done in the area that you’re looking to purchase a HMO as some local councils require a licence to be in place depending on how many rooms are to be let etc. Generally, you’ll find the interest rates for these types of mortgages are higher than standard BTL’s. Make sure the rent charged will therefore definitely cover the mortgage repayments, as well as any unforeseen interest or price rises.
Holiday lets must not be confused with a traditional BTL mortgage and are assessed differently. Holiday Lets are offered by more specialist lenders therefore can be tricky to find the right mortgage, however we do have lenders who can look at this.
Holiday lets can be risky from a lender’s view as there is likely to be periods of time where the property is not being used and an income is not generated, especially if the property is located in a seasonal area. However there are benefits from having a Holiday Let, the rental income generated tends to be far higher as it’s let on a nightly/weekly basis so can be a good investment property if done right.
These mortgages are only designed for flats/houses that can be sold again on the open market and not on holiday sites, lodges, mobile homes or caravans.
Buy to Let mortgages are a mortgage specifically designed for someone who does not want to live in the property and wants to rent the property once owned.
A lot of lenders will ideally want a 25% deposit on a Buy to Let property and will lend the remaining 75% for you to purchase the property.
There are lenders that allow a smaller deposit however you will find that the interest rates are far higher due to the small amount of lenders offering more than a 75% Buy to Let mortgage.
Lenders strictly do not allow you to live in the property when a Buy to Let mortgage product is secured against the property. If you’re looking to purchase a property to live in then you will need to look at a residential mortgage product.
Most lenders don’t allow this. There are a handful of lenders who can consider this on a ‘regulated BTL’ basis and will have to agree this prior to the mortgage offer being issued.
Not always, there are lenders that can consider applicants who don’t own their own home. There are even some lenders who will allow a first-time buyer to purchase a BTL.
In most cases you will need to pay an additional stamp duty ‘surcharge’ starting at an extra 3%. This was introduced in April 2016 for anyone who was buying an additional property.
If you’re looking for advice on how much this may cost we recommend getting advice from a solicitor who will give expert advice on exactly how much to expect.
6th June 2023
When it comes to navigating the world of mortgage repayments, BTL criteria’s and securing the right residential mortgage for your rental property, having the correct guidance is crucial. At Connely Roberts Mortgages, we specialise in helping clients with mortgage applications, whether it’s for a contractor mortgage or a commercial loan.
Our team of experienced mortgage brokers understand the rental market intricately and can tailor expert advice to your unique financial commitments. As a specialist company in the field, we pride ourselves on offering personalised services to guide you through the complexities of the process. Trust us for unparalleled expertise and a dedicated approach to securing the best repayment mortgage for your investment. Get in contact with a member of the Connely Roberts Mortgage Services today.
Mortgages based on hourly/daily rate, we are experts with over 10+ years experience working with contractors.
We are here to help you take your first step onto the property ladder, with deposit options as low as 5%.
Is your remortgage due soon? We have access to over 140 lenders and have access to thousands of mortgage products.
We offer a range of Buy to Let mortgages to new and existing landlords, including HMO and Limited Company applications.