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COMPLEX BUY-TO-LET MORTGAGES
What is a complex buy-to-let mortgage?
These are specialist mortgages aimed at people in unique circumstances when a basic first charge mortgage or standard buy-to-let mortgage is not suitable. Not every person or business is the same and when applying for a mortgage any unique circumstances can make it harder to be accepted. Like buy-to-let mortgages, your application can be judged on how strong your business case is, or whether your rental income can cover the mortgage payments.
Most suppliers of complex buy-to-let mortgages ask for a 125% rental coverage. This means that if your monthly mortgage payments are £1,000, you would need a rental income of £1,250 to be accepted. This may go up to 145% with some lenders.
The complex part of a complex buy-to-let mortgage comes from:
1
Problems with a property. Anything that makes it hard to judge the validity of the rental income quoted by the applicant or whether the property can be consistently rented out in the long term. This often applies to commercial or part-commercial properties.
2
Borrowers could have credit or experience challenges, making it harder for lenders to have confidence in their business model. Other issues include when the borrower is a group of individuals or a Special Purpose Vehicle Company.
3
Unusual mortgage terms. These include terms up to 30 years, short-term interest-only mortgages and second charge buy-to-lets.
4
Banks’ exposure limits. These are ways that high street lenders manage their risk by limiting how much lending they do to a particular geographical area, individual landlord or even a single property. It may mean they can be less likely to lend.
Complex buy-to-let mortgages can be used for residential and commercial properties – or a mixture of the two. They are good for mixed properties such as flats over shops, flats over or near restaurants or late-night stores (due to noise levels), or buildings with leisure uses such as pubs, where a tenant would live in the property.
They are also useful for divided properties like Houses of Multiple Occupancy, where there are different tenants in the same house, such as student houses, or where multiple separate properties have been created on the same property title, e.g. when one house has been converted into several flats. This is due to the complexity of managing multiple tenants, whilst keeping occupancy levels high.
Foreign businesspeople and expats, offshore companies, and self-employed or retired people can have problems getting a straight forward buy-to-let mortgage and may benefit from using a more complex buy-to-let product.