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Buy to Let Mortgages for the Self-Employed

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Buy to Let Mortgages for Self-Employed Applicants

What Self-Employed applicants should consider when purchasing Buy to Let property

As a Self-Employed person looking to purchase a Buy to Let property, your considerations are predominantly the same as any other applicant. The mortgage itself and the application process, from the applicants point of view, are no different than they would be for a PAYE applicant, other than in relation to proof of income.

As Self-Employed income is still seen to be less stable than income gained from more traditional employment, Mortgage Lenders will ask Self-Employed applicants to provide evidence of a stable income over a duration of two to three years.

Whilst you will need to prove a stable income, with a Buy to Let mortgage, there is less focus on your income when it comes to affordability, given that the loan is calculated based on the potential rental yield (income) of the property.

Some more general considerations that would be beneficial before you apply for a Buy to Let mortgage are:

Will your chosen property achieve 125-145% of the mortgage repayments in rental income? – research of the local rental market is advisable

  • Is there a way to maximise your income potential? – For example, you may consider the type of tenants or whether you will rent as a HMO (house of multiple occupancy)
  • Can you raise the 25% deposit requirement?
  • Landlord protection policies should always be considered to cover you for rent-free periods
  • Do you have a plan in place to repay the loan at the end of the mortgage term?
  • You won’t be able to live in the property yourself, not even during renovation

What are the features of a Buy to Let mortgage?

Another thing to consider before you apply for a Buy to Let mortgage is whether you will meet the criteria, as per the below:

  • You must be a homeowner
  • You need a good credit score
  • You must repay the loan before you turn seventy
  • Most lenders have a minimum income requirement of £25,000
  • Many lenders require prior landlord experience

You should also note that the vast majority of Buy to Let mortgages are interest-only and won’t be regulated by the Financial Conduct Authority unless you only intend to rent to close family.

Buy to Let as an individual or through a Limited Company?

Some landlords find it beneficial to purchase their Buy to Let properties through a Special Purpose Vehicle, rather than as an individual.

Whilst you may wish to consider this, you should be aware that high street lenders don’t tend to offer this option and you will need to use a specialist lender. Also, the benefits depend on your tax status, so it’s essential that you take professional tax advice before considering this option.

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Total Home Loans are a national mortgage broker with whole of market access. Their combined experience of over 50 years in the mortgage and financial services industry means they have an enviable reputation and one which makes them well-placed to find the most suitable mortgage solution for you.

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What is an SPV?

A Special Purpose Vehicle (Also known as SPV) is a special type of Limited Liability company set up specifically to buy investment properties.

How will your income be assessed?

Your income will be assessed to ensure that you can afford the mortgage repayments, but your loan won’t be capped at a multiple of your personal income, like it would with a standard residential mortgage, as it’s based on the rental yield of your purchase.

The documents you need will vary, depending on the type of Self-Employed activity you participate in, but will likely include:

  • Two to three years of accounts
  • SA302 tax returns / HMRC tax overviews
  • Business bank statements, if applicable

What is Top-slicing?

Mortgage Lenders may allow Self-Employed Buy to Let applicants to borrow a director’s loan or dividends from their own company to make up the large 25% deposit requirement. This is known as top-slicing.

There can be both personal and business tax implications to top-slicing, so it’s important to seek professional tax and financial advice before you consider it.

What are the tax implications?

  • Income Tax will be due on all rental income
  • Capital Gains Tax and Income Tax are payable when you sell the property
  • Stamp Duty is due on the purchase of any property additional to your home, valued at £40,000 or more, at a rate of an additional 3%

Are there any tax benefits?

Tax relief is available to landlords who are basic-rate taxpayers on costs such as repairs and letting agent fees.

How can Total Home Loans help?

Here at Total Home Loans, our Mortgage Brokers are experienced in helping Self-Employed applicants to find the most appropriate Buy to Let mortgage for their needs. Whether you’re a first time landlord or adding to a large portfolio of properties, we can help you to maximise your income potential by ensuring that you approach a lender who can offer the most competitive deal for your circumstances.

Your property may be repossessed if you do not keep up repayments on your mortgage
Some buy to let and let to buy mortgages are not regulated by the Financial Conduct Authority

Your property may be repossessed if you do not keep up repayments on your mortgage.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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What our clients say..

Fantastic service and top communication, they helped me get a mortgage when others didn't want to know, can't speak high enough of them
P Wiggin
Great service from mark and team. I needed a mortgage incorporating forces help to buy and government help to buy. He made this all very easy. Would recommend to all those needing help with their mortgage.
J Williams
As first time buyers, my husband and I were amateurs during the buying process. Mark and colleagues at total home loans made the whole mortgage process easy and quick. I will be recommending total home loans to all those requiring a mortgage.
S Williams
Excellent service to obtain a mortgage when other firms and banks refused to help. Truly grateful for such a friendly and great professional service.
G Jones
The customer service from the THL team was exceptional, kept me fully informed throughout. Professional!
J Odwyer
Outstanding service from the THL team! They are all very friendly, professional, honest and helpful! Tangy and Mark have made the entire process a breeze and we couldn't have asked for a better experience. We cannot recommend them enough!
A
Got in touch with Mark & Tangy at Total Home Loans in early 2019 to ask about mortgages, after so many false starts with the buyer of our home and the place we wanted to purchase (took nearly a year in the end) Mark & Tangy always gave excellent advice and nothing was to much trouble for them. Our fixed rate is going to be ending toward the end of this year (2021) and I will have no hesitation in getting in touch with them to help us out again. No Drama, No Hassles, Just straight forward advice and help.
C Dowding
Me and my wife have used total home loans on 2 separate occasions and both went without fault. Very impressive service always communicating on a regular basis to make you feel completely in control of the process. We highly recommend you put your trust in the company especially mark and tangy. Top team.
C Eggs
We have been using Total Home Loans for many many years now and always go back every year to Mark and Tangy they are professional, friendly, easy to talk to and always find us the best rates. Most recently with our house move, the advice from them was perfect and they made it happen for us. Nothing seems to be a problem for them and they made the mortgage side of our move smooth and stress free. Thank you and we will be back in February for our new rate ;)
K Cox

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We do NOT charge any upfront cost. We may charge a typical fee of up to 2% of the amount of the loan for arranging a mortgage.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Total Home Loans Limited is an appointed representative of Quilter Mortgage Planning Limited, which is authorised and regulated by the Financial Conduct Authority.

Approver Quilter Mortgage Planning Limited. 12/04/2022

Total Home Loans Ltd: Registered in England & Wales, No. 06436412. Registered Address: 470 Holdenhurst Road, Bournemouth, BH8 9AQ.

The guidance and/or information contained within this website is subject to UK regulatory regime and is targeted at consumers based in the UK.

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