LMJ is a firm of independent financial advisers specialising in the management of investment portfolios and pensions. We have been helping clients navigate complex financial markets since 2001 and from those very early days, our business has evolved primarily through client recommendations. Read More
A 'Buy-to-let' mortgage is a mortgage arrangement in which an investor borrows money to purchase property in the private rented sector in order to let it out to tenants. Buy-to-let mortgages have been on offer in the UK since the late 1990s.
Lenders calculate how much they are willing to lend using a different formula than for an owner-occupied property. The calculation is typically a multiple of the owner's annual income, rental income calculations and other minimum requirements.
The interest rates and fees that are offered on BTL mortgages are, on average, slightly higher than those for an owner-occupied mortgage. This is due to the perception amongst banks and other lending institutions that BTL mortgages represent a greater risk than residential owner-occupier mortgages.
This type of investment has become very popular in the UK over the last five years or so, as house prices have dramatically increased. Another reason for their popularity is the tax advantages that are available to UK BTL investors.
Rental income is considered in the same way as salary, therefore tax is generally assessed at 20% or 40%. However, landlords can deduct costs from the taxable portion of their rental income, and these costs can include the interest portion of their BTL mortgage repayments as well as maintenance costs on the property. Also, no National Insurance contributions are levied.
If the landlord has used the BTL property as a main residence for a period then capital gains tax relief may also apply (so called "flipping"). These income tax incentives have made BTL investments more popular over the last few years.
The Financial Conduct Authority does not regulate some aspects of buy to let arrangements
LMJ Financial Management Ltd
Upper South Hall
Bullen Farm Business Centre
Kent, TN12 5LX
Tel: 01732 874111
Fax: 01732 874222
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