If you want to buy rental property as an investment in the UK, you'll usually want what's known as a buy-to-let mortgage. Understanding how this type of mortgage works is helpful if you're going to invest in a rental property in the UK.
Most buy-to-let mortgages in the UK are what are known as unregulated mortgages. You'll be looking for an unregulated buy-to-let mortgage if you won't use the property in a personal capacity or rent it out to anyone who is not a family member. Regulated mortgages are different, and these products are used if you are buying a property you will live in now or in the future or if you will make it available to a family member (a child studying in the UK, for example). It's essential to understand the differences between regulated and unregulated mortgages because which product you need impacts which lenders Enness will approach for you, how much you can borrow and the regulations around affordability.
Usually, US buyers want to use the income from their UK rental to cover the monthly mortgage repayments. This is logical and makes great sense from a planning perspective. However, note that in the UK, lenders want to see rental income tops your monthly mortgage payments by about 110% to 150%, but this can change from lender to lender.
As a non-resident, even if you are a high-net-worth individual, lenders will assess you carefully for UK buy-to-let property. Being a US citizen can make it harder to get a mortgage, and not all lenders can work with US-based borrowers. Enness has a network of lenders that gladly work with US citizens and residents, and your broker will ensure that the mortgage process moves forward quickly and smoothly. As long as 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 large loan.
Some lenders prefer to work with US investors who have already made UK real estate investments and have a property portfolio as it gives confidence in your ability to manage rentals in the UK. If you are a first-time investor, you will still be able to access a UK buy-to-let mortgage, provided your financial situation supports it. If you're a first-time investor, it's always helpful to clearly document your plan of action for marketing the property and showcasing how you plan to manage property upkeep and maintenance, your network and connections that will help you run the property and so on.
In some cases, you may be able to do what is known as top-slicing. This mechanism is used when the rental revenue you make on your buy-to-let property isn't enough to cover the monthly mortgage payment. If you want to top slice, Enness approaches lenders that will let you use rental and personal income to pay your mortgage. Top slicing can sometimes increase how much you can borrow, but it's not available to every borrower. It's usually something lenders will consider 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 not being able to repay the mortgage, especially as you are a non-resident borrower. If you would like to explore top-slicing as a US national or resident buying UK property, Enness 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.