Buy to Let Secured Loan – Avoid the Common Pitfalls
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable
Are you wondering what a buy-to-let secured loan is? You’re not alone! Every month, more than 6,900 people visit our site seeking advice on secured loans.
In this easy-to-understand guide, we’ll address the following questions:
- Can you borrow against your house to buy a buy-to-let?
- Can you get a secured loan on a buy-to-let property?
- What is the minimum you can borrow on a buy-to-let mortgage?
- How to avoid the buy-to-let secured loan pitfall?
I know that understanding secured loans can be a bit tricky. But don’t worry. We’re here to help you figure things out and make an informed decision.
Let’s dive in!
Can I borrow against my house to buy a buy-to-let?
Yes, an alternative to a BTL mortgage is to borrow against your existing home to purchase an investment property outright. This could work by taking out a secured loan against your residential property’s equity and using the money to buy the other property.
For example, you might live in a £300,000 home with an existing £100,000 mortgage, giving you £200,000 in home equity. You may see a local flat for sale for £100,000 and want to buy it as an investment and rent it out.
You could take out a secured loan against the equity in your existing property to fund the purchase, namely a home equity loan. You might be allowed to take up to 80% of your home equity, giving you enough to purchase the investment property without the need for a BTL mortgage.
However, you will need to prove to the home equity loan provider that the loan will be affordable on top of your existing mortgage and any other debts you may have.
Can you get a secured loan on a buy-to-let property?
It’s possible to secure a loan against the equity you have built up in a buy-to-let property.
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You might have purchased an investment property several years or decades ago. Through years of BTL mortgage repayments, the property might be nearly paid off, giving you a significant amount of equity in it.
You could then secure a loan against some of the equity in the property. This may be done to help purchase other properties or make other investments, or it might be done to make home improvements to the rental property, which would then allow you to charge more in rent.
Lenders may look at specific things when offering secured loans on a BTL property, such as credit score, rental yield, location of the property, and the borrower’s financial stability.
Lender |
APRC |
Monthly payment |
Total amount repayable |
|---|---|---|---|
| United Trust Bank Ltd | 5.99% |
£218.73 |
£26,247.92 |
| Pepper Money | 6.86% |
£220.24 |
£26,429.17 |
| Together | 6.95% |
£220.40 |
£26,447.92 |
| Selina | 7.5% |
£221.35 |
£26,562.50 |
| Equifinance | 7.7% |
£221.70 |
£26,604.17 |
| Spring | 10.5% |
£226.56 |
£27,187.50 |
| Loan Logics | 11.2% |
£227.78 |
£27,333.33 |
| Evolution | 11.28% |
£227.92 |
£27,350.00 |
Representative example: If you borrow £34,000 over 15 years at a rate of 8.26% variable, you will pay 180 instalments of £370.70 per month and a total amount payable of £66,726.00. This includes the net loan, interest of £28,531.00, a broker fee of £3,400 and a lender fee of £795. The overall cost for comparison is 10.8% APRC variable. Typical 10.8% APRC variable.
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Buy-to-let secured loan options
Some options to borrow against the equity in a BTL property are:
- Home equity loans
- HELOCs
- Home improvement loans
- Homeowner loans
What are the tax implications of taking a secured loan on a BTL property?
It’s important to consider any tax implications of taking out a secured loan on a BTL property. Changes could include tax relief on mortgage interest or potential Capital Gains Tax.
What is the minimum I can borrow on a buy-to-let mortgage?
So, how much can you borrow using a secured loan when you have an existing BTL mortgage? The minimum amount you can borrow through these loans is usually determined by the lender, anywhere from £10,000 to £20,000.
The maximum amount you can borrow using these loans will be determined by the amount of equity you have in the investment property and the lender’s maximum LTV ratio.
Consider other fees as part of the loan, too, including arrangement fees, valuation fees, or potential early repayment charges; these fees can impact the overall cost of your loan.
Secured loans for all purposes
- Stuck paying high interest on credit card debts & loans?
- Looking to fund a home improvement project?
- Dreaming of finally taking the once-in-a-lifetime trip?
Polly
“This was by far possibly one of the nicest experiences I’ve had getting a secured loan.”
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Avoid the Buy-to-let secured loan pitfall
Of course, taking out another loan against a property will put that property at risk. You could lose your investment property if you don’t repay the secured loan as agreed. It’s one of the pitfalls attached to a secured loan on buy to let property.
The lender would force the sale, and the sale proceeds will be used to clear any BTL mortgage debt first and then any junior liens of credit (secured loans against the property).
To mitigate the risk of losing your property by failing to repay, it’s important only to borrow what you need against the property’s equity – not what’s available.
The way I see it, by only borrowing what is necessary, you’ll ensure that your monthly repayments are smaller and more manageable in the future.
Should I use a broker to get a secured loan?
A broker uses your information to search through a vast number of partners to find a loan you may be approved for. A broker can help you find more competitive rates and understand the market, as well as guide you through the application process.
However, you could miss out on the best secured loans if they are not partnered with the best loan lenders, and they could potentially cost you more due to hidden fees, and you may be paying some sort of commission as you repay the loan.
If you do decide to apply for a secured loan with an online lender, make sure you only apply to ones that are authorised and regulated by the Financial Conduct Authority. You might also find these loans advertised by building societies, mortgage specialists and even supermarket finance departments.
