If you are looking for a buy to let mortgage, then using the services of a mortgage broker makes sense. The following frequently asked questions (FAQs) outline some of the benefits in doing so.
Do I really need mortgage advice?
At first sight, you might wonder why the advice of a mortgage broker is necessary. You know that you want a mortgage to finance the purchase of a buy to let property and – largely thanks to the internet – it is easy to do you own research into the many lenders offering buy to let mortgages.
But the cost of going it alone – making what is formally called an “execution-only” application, explains the Money Advice Service – may be high. The mortgage you end up with might be completely inappropriate, and you have no one to turn to if the application does not turn out as you had expected.
Your independent application to the mortgage company you have chosen may be rejected – and that, in itself, may harm your credit rating.
How does the broker help?
With such a wide range of mortgage products available for prospective landlords, a buy to let mortgage broker can home in on precisely the mortgage that suits you and your plans.
In common with the majority of such mortgages, it is likely to be interest-only. But those interest rates may vary significantly, and your broker is well-placed to identify the most competitive deal. Indeed, many brokers have access to special buy to let mortgage products which are not otherwise available to those who approach the lender independently by making an execution-only application.
When discussing buy to let mortgages, your broker may also offer advice on your income tax implications. Now that income tax relief on mortgage interest repayments has been removed for buy to let landlords, that advice may be especially relevant.
How competent is a broker?
You are likely to find the experience, expertise and advice of a buy to let mortgage broker invaluable.
The competence and reliability of that advice are backed up by the broker’s need to be authorised and regulated by the Financial Conduct Authority (FCA). If you subsequently have reason to question or to complain about that advice, you may make your case to the independent Financial Ombudsman Service.
Is it worthwhile forming a limited liability company to raise my buy to let mortgage?
Not only is this a highly pertinent question – certainly as far as your tax liabilities are concerned – but it is also a subject on which your buy to let mortgage broker can advise.
There are specialist buy to let mortgages for limited liability companies, and it may be worth your while forming one if you pay more than the basic rate of income tax. As a company, for example, you pay the standard rate of corporation tax, which is 19%, compared to the 20% basic rate of personal income tax. If you are paying at the higher rate of income tax, however, you pay 40%, or 45% if your earnings make you liable for the additional rate of income tax.
Against these potential savings, however, you need to offset the costs in setting up and maintaining your company. Forming a limited company for a buy to let business is not right for everybody, so seeking specialist help and advice should be your first step.