Taking out a mortgage as a landlord

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a man giving mortgage advice

Whether you’re a first-time homebuyer navigating unfamiliar terrain or a seasoned owner looking to switch things up, securing a mortgage can be a daunting endeavour. 

But have no fear – this comprehensive guide arms you with insider knowledge to tackle the process with confidence. From calculating affordability to avoiding common mistakes, we’ve got you covered on the home financing front. To begin, here are the major leaders in the UK and their corresponding websites:

Lender Website
Halifax halifax.co.uk
Nationwide nationwide.co.uk
Santander santander.co.uk
Barclays barclays.co.uk
HSBC hsbc.co.uk
NatWest natwest.com
Lloyds Bank lloydsbank.com
Virgin Money virginmoney.com
Yorkshire Building Society ybs.co.uk
Coventry Building Society coventrybuildingsociety.co.uk

Familiarise yourself with the mortgage process

To familiarise yourself with the mortgage process, embark on a comprehensive journey of research and education. Evaluate your financial situation, considering income, debts, and credit score, to establish a realistic budget. 

Explore various mortgage types, understanding the nuances of fixed-rate versus adjustable-rate mortgages and government-backed loans. Learn about the application process and gather the necessary financial documents in advance.

Review your credit report, addressing any discrepancies. 
Seek professional advice from mortgage brokers or financial advisors for personalised guidance. Stay informed about current mortgage rates and economic factors influencing them.

Read reviews on lenders and attend homebuyer workshops to gain insights from others’ experiences. Here is a table of the major lender of mortgage in the UK based on market share:

Lender Market Share
Lloyds 15.8%
Nationwide 13.3%
Royal Bank of Scotland 11.4%
Santander 10.5%
Barclays 8.6%
Coventry BS 3.2%
Virgin Money 2.5%
Clydesdale Bank plc 1.8%

By undertaking these steps, you’ll empower yourself with the knowledge needed to navigate the mortgage landscape confidently and make well-informed decisions aligned with your financial objectives.

Calculating how much you can borrow

When calculating how much you can borrow for a mortgage in the UK, one common method involves using an income multiplier. Begin by determining your gross annual income, let’s say it’s £40,000. Lenders often use a multiplier, typically around 4.5 times your gross annual income but this depends on the interest rate as well.

Bank of England Base Rate


Check out the Bank of England’s website to double check this figure out for yourself.

Multiply £40,000 by 4.5, resulting in a potential maximum loan amount of £180,000. It’s important to note that this is a general guideline, and lenders also consider factors such as your monthly expenses, outstanding debts, credit history, and the size of your deposit, typically 5-10% of the property’s value. 

Ensure that the monthly mortgage repayments remain affordable, factoring in potential interest rate changes and future financial circumstances. It’s advisable to seek advice from mortgage professionals for a more accurate assessment tailored to your specific situation and the lender’s criteria.

An example of a calculation 

Step Description Example Value
1 Determine gross annual income £40,000
2 Mortgage multiplier (typically 4.5x) £40,000 x 4.5 = £180,000
3 Potential maximum loan amount £180,000
4 Calculate affordability Monthly repayment: £818
(Interest rate 5% over 25 years)

Advice on your mortgage application

Before you begin on your mortgage journey, there are some things that you can do before you step foot in a mortgage broker or pick up the phone. 

While requirements differ across lenders, to begin, there are a few key items to get in order upfront for a smooth application process. Confirm your UK residency status and have ID handy to verify your identity and age. Calculate your total household income from all sources, converted to GBP if needed. Alos, determine the maximum mortgage term you would be comfortable with.

Reach out to an advisor early to tailor a plan to your specific situation. With thorough preparation, you can feel confident in putting your best foot forward.

Unsure about applying for a mortgage

As leading property investment advisors and managers in the UK, Cozee guides you seamlessly through the entire sales or purchasing process 

How to find the best deal on your mortgage

Finding the best deal on your mortgage can seem like a daunting task because of the amount of lenders there are but in general, you should

  • Shop around extensively: Don’t just go with your existing bank. Compare mortgage rates and products across multiple providers.
  • Get professional advice: Connect with a broker who can access deals you can’t directly. They can provide guidance on product suitability.
  • Compare total costs: Look beyond just interest rates. Factor in all fees, charges and insurance to get the full cost picture.
  • Consider specialty lenders: Building societies, credit unions and private banks can offer very competitive deals.
  • Look for first time buyer incentives: Many lenders offer special discounted rates or cashback for those buying their first home.
  • Have a large deposit: The higher the LTV (loan to value) the better rate you can access. Save as much as possible.
  • Improve your credit rating: Good credit score means better rate. Review your report and improve any issues.
  • Evaluate fixed vs variable: Weigh up rate certainty vs flexibility. Longer fixed terms often mean better rates.
  • Be open on product type: Alternatives like offset mortgages can provide savings in certain situations.
  • Negotiate: Ask lenders to beat competitor offers and secure a better deal
two man negotiating

What advice should you consider when remortgaging

Remortgaging can provide many benefits like securing a lower interest rate or releasing equity, but also involves risks and costs. It is a major financial decision that requires thorough research and an understanding of your needs and options. When considering remortgaging, key advice includes:

  • Look at the entire market, not just your current lender, to find the most competitive rates and best suited products. Mortgage brokers can help identify suitable deals.
  • Calculate the fees involved like legal costs and early repayment charges to ensure remortgaging makes financial sense. Factor in how long you plan to stay in the property.
  • Be clear on your reasons for remortgaging and what you hope to gain. This will determine if it’s the right move and which type of deal to pursue.
  • Consider both short and long term implications. While you may pay less initially, think about future rate rises and whether you will need to remortgage again.
  • Research thoroughly and get professional advice. Understand the remortgaging process and rules to avoid pitfalls. An advisor can provide guidance tailored to your situation.

What remortgaging means

Remortgaging involves switching your mortgage to a new deal with either your existing lender or a new lender. It essentially means taking out a new mortgage to repay your current one, while remaining in the same property. 

The new deal could get you a lower interest rate, change your mortgage term or switch mortgage type. Remortgaging can occur at the end of your initial deal period, or you can remortgage early if there are financial benefits in doing so.

a man remortgaging

How to remortgage

The process of remortgaging involves researching new mortgage deals, comparing rates and features, and applying for the new loan. Your new lender will do a credit check and affordability assessment. 

Once approved, they will arrange for funds to be transferred to your old lender to repay and close that mortgage. There may be legal fees and valuation fees to consider too. Setting up the new mortgage on your home follows the same process as purchasing it originally.

Unsure about re-mortgaging?

As leading property investment advisors and managers in the UK, Cozee guides you seamlessly through the entire sales or purchasing process 

When should you remortgage

Common times to consider remortgaging include: when your initial deal term ends and the interest rate changes, if you can get a significantly lower rate than your current deal, if you want to raise capital from your home’s equity, if you want to consolidate other debts into your mortgage, if your needs have changed and you want to alter the mortgage term or type, or if you are moving lenders for better rates or service.

Pros & Cons of remortgaging

Potential advantages include

  • Getting a lower interest rate to reduce monthly payments
  • Releasing equity to fund home improvements or other large costs
  • Financing debt consolidation
  • Customising the mortgage terms to suit changed circumstances. 

Drawbacks can be

  • The legal fees and setup costs involved
  • Spending time researching deals
  • Potential for penalties from early repayment of your current mortgage
  • Risk of rates going up again requiring another remortgage

Carefully weighing the short and long term costs vs. benefits is important.

Mortgage advice for first time buyers

The mortgage application process for first time buyers is largely the same as for experienced purchasers but there are still some key differences.  

Is the process any different for first time buyers?

You’ll still need to research options, undergo affordability assessments, and complete all legal paperwork. However, there are some key differences to be aware of as a new buyer. 

These include:

  • Needing to provide extra proof of regular savings to show financial responsibility
  • Taking advantage of specific products like 5% deposit mortgages designed for first timers
  • Potentially needing to provide references or other evidence of ability to service a mortgage if you lack credit history
  • Seeking guidance throughout the new process from real estate agents, lawyers or advisors since you won’t have been through it before. 

Being aware of these factors can help make the experience of securing your first mortgage smoother.

Residential mortgage advice

When getting a mortgage as a first time buyer, key advice includes:

  • Shop around: Shop around for the most competitive rates and lowest fees rather than going solely with your bank.
  • Be realistic: Be realistic about how much you can afford. Factor in insurance, maintenance, utilities. Don’t borrow the maximum amount possible.
  • Consider fixed rates: Fixed rate terms up to 5 years to provide stability as you transition to home ownership. Avoid very short term deals.
  • Get pre-approval: Get pre-approved so you know your price bracket when house hunting. An advisor can help determine the amount you can comfortably borrow.
  • Make sure you read: Read documents thoroughly, ask questions, and understand any conditions that come with the mortgage offer. Don’t rush the process.

How much deposit should you have as a first time buyer?

Ideally first time buyers should aim for a 20% deposit if possible. However, there are mortgage options available with a deposit as low as 5% of the property’s price. The higher the deposit, the better the interest rate deals you can access. With less than a 20% deposit, you often need to pay mortgage insurance. 

Research state assistance programs which can help provide deposits. The key is to save a deposit amount you are financially comfortable with based on your budget and goals.

a man counting his mortgage money

Mortgage advice for international investors

For international buyers investing in UK real estate, financing options may differ from local purchasers. Utilise advisors familiar with lending criteria for non-residents. 

Also, be aware that many lenders require a larger minimum down payment from overseas buyers. Seek lenders that allow foreign income and assets to be counted towards affordability calculations and make sure you’re reading up on governmental advice for international buyers here.

Buy to let mortgages

Buy-to-let mortgages are loans specifically designed for purchasing residential properties as investment rentals rather than owner-occupied homes. With buy-to-let, rental income is counted towards affordability criteria rather than just personal earnings. 

These mortgages typically require a larger down payment of around 25%. Interest coverage ratios must be met to ensure rental income sufficiently covers interest payments. Buy-to-let mortgages offer key benefits like the ability to deduct mortgage interest from rental profits for tax purposes. 

By understanding buy-to-let criteria, international real estate investors can unlock financing to efficiently grow their rental portfolios. Specialist brokers cater to overseas landlords seeking UK buy-to-let mortgages tailored to their needs.

Mistakes to avoid when applying for a mortgage

When applying for a mortgage, it is important to avoid common pitfalls that could jeopardise your chances of approval. Doing proper research, having the right timing, and anticipating all costs can help ensure the process goes smoothly.

Applying for too many capacity reports

Each application for a mortgage capacity or affordability report will show up on your credit file and can negatively impact your credit score. Applying with too many lenders in a short period can make you appear desperate and reduce your chances with any given lender. Stick to applications with 2-3 selected providers only.

a man talking to his mortgage broker

Not considering macro economic factors

Interest rates, housing markets, and general economic conditions can all impact mortgage offers and availability of products. For example, if rates are projected to rise you may want to lock in a fixed rate product early. Make sure to research the wider economy when applying.

Applying at the wrong time in the sales process

Applying too early without a live purchase in place means your mortgage offer could expire before you find a property. But applying too late can also prevent you from securing a property if you can’t demonstrate finance. 

Work with your agent to apply at the optimal time

The experts at Cozee can guide you on optimising mortgage timing based on their extensive experience in luxury real estate transactions

Not taking out insurance with your mortgage

Payment protection insurance, while optional, is worth considering to cover repayments if you were unable to work due to illness or job loss. Critical illness and life insurance are also recommended for mortgages to provide a safety net. Factor insurance into budget.

The information provided in this article is for informational purposes only and should not be construed as professional advice. Please rely on a mortgage broker for direct advice.

We are not liable for any actions taken based on the content herein and you should always refer to governmental sources and the FCA to make final decisions. We are not FCA regulated so you should not rely on the information in this article to make a decision.

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