Getting started with a Buy to Let mortgage.
You could apply for a Buy to Let mortgage if:
You can hold a maximum of five mortgages or borrow up to £3 million across the Lloyds Banking Group. This includes the following brands: Lloyds Bank, Halifax, Bank of Scotland, Birmingham Midshires, Scottish Widows Bank, Intelligent Finance and The Mortgage Business (TMB).
The maximum loan size on a single Buy to Let property is £1 million.
The most you could borrow is linked to the amount of rental income our surveyor thinks you could earn. The annual rental income must equate to a minimum of 125% of the annual (interest only) mortgage payments based on the higher of a notional interest rate or the initial rate for the mortgage deal.
The notional rate is either 4.99% or 5.49%, dependent upon the loan to value (LTV), or the initial mortgage rate whichever is higher. For 5 year fixed rates the notional rate is 4.99%.
In some cases we’ll also look at your personal income, and may take into consideration the additional cost of an increased tax liability for some customers as a result of changes in tax legislation. These changes will begin to take effect in 2017 and be fully implemented by 2020 and, as a responsible lender, we must consider how they might affect the future sustainability of your borrowing.
Use our mortgage calculator to get an idea of how much you could borrow and compare monthly payments.
Unlike residential mortgages, Buy to Let mortgages are not regulated. This means that whilst our Mortgage Advisers are here to help you every step of the way with your Buy to Let, they cannot give you advice on the most suitable mortgage.
You will need to be happy to make your own choices about your Buy to Let mortgage.
Take time to understand the costs involved in buying, running and maintaining your Buy to Let property.
Here are the main day-to-day running costs you’ll need to take into consideration. It’s important to remember you are responsible for making the monthly mortgage payments even when the property does not have a tenant.
If approved you’ll be given an indication of how much you could borrow. Most estate agents need to see this to show that you’re a serious buyer. There’s no charge for this, and no obligation to apply for your mortgage with us. You’ll need an appointment with one of our Mortgage Advisers to apply for your Agreement in Principle. You can choose to have your appointment in branch or over the phone.
Or call us on 0800 783 3534. Lines are open Monday - Friday 8am to 8pm and Saturdays 9am to 2pm. We're closed on Sundays and Bank Holidays.
Tenants - think carefully about the type of tenant you want to attract e.g. young professionals, families or sharers. Considering this may help you to decide on the type of property you purchase and its location. The property should be let on a single assured shorthold tenancy (in England and Wales), a short assured tenancy (in Scotland) or a private tenancy (in Northern Ireland). A maximum tenancy of 3 years is acceptable when the tenancy is in the form of a Department for Communities and Local Government (DCLG) model agreement of September 2014 (or as amended) or the Scottish equivalent or such other replacement tenancies as may be prescribed by legislation from time to time.
Location - do your research and visit lots of different areas. Location is an important consideration and will often determine the type of tenant you will let to. Don’t necessarily buy locally to your home. Think about prosperous towns which might attract a higher demand for rental property. Once you've chosen an area consider the locality, think about transport links, parking, shops, schools and other local facilities - pick the brains of letting agents for information about areas where properties may be easier to rent.
Condition of the property - if you're buying a property which needs improvements, restrictions could be placed on the amount you can borrow and it could also delay how quickly you can let the property out. Can you afford the mortgage payments during the renovation period?
Rental income - do your homework, talk to local letting agents, check the local press to find out comparable rental values. The mortgage valuation will include an estimate of the rental income of the property on an unfurnished basis. But remember, there are no guarantees of what rental income you will get or if the property will rise in value over time.
You can start your full application over the phone or in branch - you'll need the following:
To talk to a mortgage adviser and apply in branch you'll need to book an appointment beforehand.
To talk to a mortgage adviser and apply over the phone you'll need to call us on 0800 783 3534. Lines are open Monday - Friday 8am to 8pm and Saturdays 9am to 2pm. We're closed on Sundays and Bank Holidays.
The legal side of buying and selling a property can be carried out by either a solicitor or licensed conveyancer. For simplicity, we will refer to both of these as conveyancer.
They’ll check who owns the property you want to buy, what’s included in the sale, and whether there are any clauses in the property’s deeds you or your lender need to be aware of. In Scotland your solicitor will also put in your offer and negotiate for you.
You can use the Lloyds Bank Conveyancing Service to compare quotes from our panel of up to 200 conveyancing professionals. You can review the quotes and choose a conveyancer based on what matters to you - the price, the firm's location or their service rating.
Alternatively, you can appoint your own conveyancer, or your mortgage adviser can help arrange one during your mortgage appointment using the Lloyds Bank Conveyancing Service.
All conveyancers instructed through the Lloyds Conveyancing Service offer a 'no completion, no legal fee' guarantee, so you'll have nothing to pay for the legal work done if the purchase falls through. No legal fee is payable, however if the conveyancer has made payments to third parties on your behalf, such as fees for searches, these will still be payable.
A tenancy agreement is a contract between the landlord and tenant. It is most likely to be an Assured Shorthold Tenancy agreement (AST), which is regulated by the Housing Act 1988, and provides limited security of tenure to the tenant. Although the content of tenancy agreements varies, they should contain the following clauses:
The tenancy agreement should be signed by the tenant and the letting agent, or the landlord if no agent is involved. It can subsequently be changed if both parties agree. We recommend you seek advice from a letting agent or independent legal advice on the terms of the proposed tenancy agreement.
Initial deposits cover you against missing items or any damage caused by the tenant.
Tenancy Deposit Protection (TDP) schemes guarantee that tenants will get their deposit back at the end of the tenancy. However they must meet the terms of the tenancy agreement and must not damage the property.
Landlords must protect their tenants' deposits if they have let the property on an assured short-hold tenancy which started after 6 April 2007. However it’s good practice for landlords to protect deposits in all circumstances. TDP schemes do not cover holding deposits.
Landlords who don’t protect their tenants' deposits when required to can be taken to court by the tenant. They may need to repay the deposit plus a sum equivalent to three times the deposit. The landlord may also be unable to seek possession of their property.
There are three TDP schemes approved by the UK Government:
There are two types of TDP scheme:
Standard home insurance policies do not normally pay out when a property is let.
Landlord insurance is a specialist policy that covers landlords against a range of eventualities. As well as insuring the building and any contents that belong to the landlord, these policies often provide legal cover.
This may help with the legal costs of dealing with tenant disputes and include other valuable cover including:
Tenants are responsible for insuring their own personal possessions.
The Landlord and Tenant Act 1985 covers the three main areas of responsibility which landlords have under an Assured Short-hold Tenancy (AST).
Landlords must keep the structure and exterior of the property in a good state of repair. You are responsible for ensuring that the property is safe, fit for use and in a fair condition.
Landlords are responsible for the safety of gas installations and appliances. You will need to have an annual safety check and keep proper records of the checks. There are also regulations covering the safety of electrical installations and appliances. Though not currently compulsory in all properties, it makes good sense to fit carbon monoxide and smoke detectors in all let properties. Landlords must ensure they are aware of any changes to relevant legislation.
You must be able to verify that any soft furnishings and fittings you provide adhere to the relevant standards. Make sure you seek independent advice on your responsibilities.
At the end of an Assured Short-hold Tenancy (AST) as a landlord you have an automatic right to possession of the property, as long as you have given the tenant two months’ notice to vacate the property.
If the notice period expires and the tenant has still not left the property, you will need to start the process of eviction through the courts. You must not forcibly remove the tenant without an eviction order.
Landlords seeking possession under an AST because the tenant has not paid the rent, or broken other terms of the agreement, will need to use one of the reasons or 'grounds' for possession specified in the Housing Act 1988.
We work with Arthur J. Gallagher Insurance Brokers Limited, who will search a panel of insurers to get you a quote.
Lines are open Monday to Friday 8am-6pm.
YOUR PROPERTY MAYBE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE