If you are considering investing in a buy-to-let property in the UK, it is worth understanding the broad differences in the lending products available. Most buy-to-let mortgages in the UK are unregulated. You can use an unregulated buy-to-let mortgage if you (or a family member) do not intend to live in the property. Regulated mortgages are used if you are buying a property you will live in – for example, if you are an expat planning a move back to the UK now or in the future, or if you will rent the property to a family member. The differences between regulated and unregulated mortgages are worth understanding before starting a property search because they influence how much you can borrow and the rules surrounding affordability.
In most circumstances, if you buy a UK property you plan to rent out, you will want to use the rental income to pay off the monthly mortgage. This is standard practice for property investors, and it makes perfect sense from a planning perspective. However, be aware that lenders will want to see that your rental revenue exceeds your monthly mortgage payments by a significant margin. The excess is usually calculated as a percentage, and the margin required will vary from lender to lender, but it is normal for lenders to want to see a margin of at least 110%, although 150% is also common.
Even if you are a high-net-worth individual, lenders will assess you carefully for UK buy-to-let property. Lenders, particularly in the UK, always consider and weigh the risk of lending to non-resident borrowers carefully. However, provided you are in good financial standing and can document that the mortgage is affordable, you will still be able to borrow – even if you are looking for a significant loan.
Some lenders prefer to work with non-resident investors who have a track record of successful property investments in the past. However, many lenders are happy to work with first-time investors, provided you have feasible plans lenders can get behind. Here, it is always worth documenting your plan of action for marketing the property and showcasing how you plan to manage property upkeep and maintenance.
If needed, top slicing may also be an option. You can use top-slicing when the rental revenue you generate from your buy-to-let property is insufficient to cover the monthly mortgage payment. In these cases, Enness can often work with lenders to get them to let you utilise a combination of rental and personal income to pay the mortgage. Top slicing can sometimes increase how much you can borrow, but it is not offered to every borrower and tends to be something lenders reserve for high-net-worth individuals with excellent income. Lenders will want to ensure that top slicing is a viable option from a risk perspective and that you are not at increased risk of default, especially as you are a non-resident borrower. If you would like to explore top slicing as a Singapore resident buying UK property, can negotiate this for you.
Whether you want to buy in London or elsewhere in the UK, and however much you want to borrow, Enness will be able to help you secure the most competitive UK mortgage rates and terms from a network of more than 500 lenders.