If you’re struggling to raise funds against your buy to let property with a standard buy to let mortgage, then a buy to let secured (2nd charge) might be an option for you.
There are several lenders that offer loans secured on buy to let properties all offering different rates and products (e.g. fixed rate / variable rate) as well as interest-only options.
Whether you’re a professional landlord looking to arrange a secured loan across several properties and need capital to grow your portfolio or you own one buy to let and want to raise money for any purpose our buy to let secured loan experts can help.
How the loan application works.
The lender will look at the client’s individual circumstance e.g. LTV and credit profile etc, but for affordability assessments, lenders will typically do the following.
- The lender will look at what tax rate payer you
- The will take the rental income from the property and divide it by the following % (depending on your tax rate)
- The will then deduct your mortgage payment (and if applicable any ground rent/service or letting agent fees off)
- The figure left gives you a monthly payment the lender deems affordable - you can then borrow an amount with a monthly payment that falls within that budget.
For example, if you had a property with a mortgage payment of £250 and a rental income of £695 and your annual salary was £30,000 classing you as a basic rate taxpayer the lender would do the following.
£695 divided by 125% (basic rate taxpayer) = £556 month
£556 - £250 (mortgage) = £306
We could then offer a loan with a maximum payment of £306 on a capital or interest-only basis.
Once you have accepted an offer from a lender the process can often be very quick.
Documents will be issued to you for completion and return along with ID, a copy of the tenancy agreement and income proof (income proof is only used to confirm what tax rate payer you are)
Once the paperwork has been processed the valuation will be instructed.
Once the valuation is finished the lender should be ready to complete (subject to the valuation being ok).
A secured loan (2nd charge) on a buy to let can be used for any purpose – e.g. Home improvement to the buy to let property itself or a different property, to pull equity out of your current buy to let to help buy another.