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Buy To Let Guide

What is a buy to let Mortgage?

A buy to let mortgage is a loan for purchasing or refinancing residential property which is let to tenants rather than lived in by the borrower. Classed as a business transaction, rates and fees are typically higher than those you would find with a standard residential mortgage. You’ll need a larger deposit too – the maximum you can borrow is 85% loan to value although there are many more rates available at 75% loan to value.

Risks Involved?

Property investment can be a very effective way of generating income if managed correctly, however it doesn’t come without its risks.

Property investors typically rely on their rental income to repay their mortgage, so if a landlord is unable to secure a tenant and the property is left unoccupied there is a chance they won’t be able to keep up with their mortgage repayments, meaning the property could be repossessed.

A void period is not the only risk that needs to be considered by those looking to go into property investment; major repairs could increase overall costs and of course the housing market on its own can have a huge impact on an investors’ potential profit margin.

Borrowing Criteria?

Unlike residential mortgages which are calculated on the basis of the applicant’s salary, buy to let mortgages operate differently. The mortgage lender applies a rent to interest (RTI) cover calculation, meaning the borrower must be able to prove they can obtain enough rental income from the tenant to cover the interest on the mortgage. RTI cover amounts vary between lenders, however the rental income usually has to be between 125% and 130% of the monthly mortgage repayment. A large proportion of lenders also require a minimum income of £25k per annum in addition to the income made from rent.

Like any other mortgage, the borrower must put up a deposit for the property. Currently buy to let mortgages are available up to 85% loan to value (LTV), meaning the borrower would have to put up a deposit of 15%. However, 75% loan to value is a more achievable figure.

As far as age restrictions are concerned most buy to let mortgage lenders impose a maximum age of 75 on maturity of the loan, however there are a small selection of specialist lenders that extend this to 85 years.

Repayment Type, Interest only or Repayment?

The decision of whether an investor chooses an interest only or repayment (capital and interest) buy to let mortgage will very much depend on the individual’s investment strategy. The repayment route is often suited to investors using property as an alternative pension plan or looking to build a small property portfolio. With monthly capital and interest repayments, the investor can be sure that at the end of the mortgage term the full loan is repaid.

The interest only route is usually more popular with professional landlords and property investors for two main reasons. Firstly, with an interest only strategy the investor’s aim is usually to continue building a sizeable portfolio of property. By choosing this strategy the investor has the cash flow to re-gear their property capital to increase their number of properties. This is usually a long-term strategy. At the end of the mortgage term, the property is usually sold to repay the initial advance. Secondly, there are certain tax advantages as interest due on buy to let mortgages can be off-set against tax. We recommend that you seek professional advice from a qualified accountant

Why use a Broker?

Majority of buy to let mortgages can only be accessed via intermediaries, so you will be limiting your options if you choose to go direct.

At Goldwyns Financial, we sometimes access exclusive and semi-exclusive buy to let products In addition.

Foreign National Loans

We are able to arrange buy to let, commercial and investment loans to foreign nationals  depending on the criteria using their income and document in the domicile country.

 

 

The Financial Conduct Authority does not regulate some aspects of buy to let mortgages, overseas mortgages and tax advice.

Help and advice in regards to mortgages is available at www.moneyadviceservice.org.uk

We do not offer consumer buy to let.

Commercial Mortgages

We are specialist in finding the most suitable commercial mortgages in the UK for both investors and business owner-occupiers. Our expert brokers understand the market and know when to approach a high-street bank or a specialist lender for your commercial mortgage requirements.  Talk to us today and let us help you.

There are two types of commercial mortgage – an owner occupier mortgage for trading premises and a commercial investment mortgage for those looking to invest in commercial property. Our team of specialist brokers can help you source both.

Rates for business mortgages are dependent on experience, track record, industry sector and the strength and performance of your business or the business you are considering.

Currently most high street lenders are offering our clients fantastic rates whether you are an existing or new operator. Lender arrangement fees between zero and 2% and up to 80% loan to value for top performing businesses. We can arrange up to 100% of a purchase price with the benefit of supporting security.

Currently the high-street lenders are offering some good rates to investors looking for 65% loan to value or less.

Competitive terms are available for business owners although be prepared to move your business banking to achieve the best terms available.

Commercial mortgages from the specialist lenders tend to be priced higher but they don’t want your business banking, will offer some interest-only payment terms and they’ll lend up to 75% loan to value.

To go over your borrowing requirements and find out what rate you can expect to pay, give us a call.

 

 

The Financial Conduct Authority does not regulate some aspects of commercial mortgages, buy to let mortgages, unsecured loans and bridging finance.

Bridging Finance

A bridging loan is essentially a short-term loan that is often arranged within a short time-frame and may be made to an individual or a company and secured against residential or commercial property. The defining characteristic is that it is a loan that bridges the gap to an exit, which is usually a refinance or a sale of the asset. We’ve helped hundreds of customers getting bridging finance for their projects, so do give us a call if we can help you. We will introduce any regulated and consumer buy to let to an independent 3rd party broker.

How long ?

Bridging loans can be arranged within a matter of hours with funds released within 48 – 72 hours although usually this takes a bit longer and can take a couple of weeks. While a bridging loan may be arranged much quicker than could be achieved through a traditional bank, most bridging finance companies still apply sensible and relatively conservative lending criteria. Usually such lenders are smaller nimble operations and specialise in doing all the usual checks that a bank will do but without the encumbrance of bank bureaucracy.

The term of the loan can be as short as one day usually up to a maximum of 12 months. Loan amounts generally start at around £30,000 with no maximum. We will introduce any regulated and consumer buy to let to an independent 3rd party broker.

Why Use Bridge Finance

Many investors, individuals and businesses including professional landlords, property investors and developers all use bridging finance as part of their overall property funding strategy and can be arranged on a second charge basis.

Why Bridging

The main reasons that property professionals use bridging loans are:

  • To raise finance quickly
  • To refurbish a property
  • To finish a development
  • To buy at auction
  • To purchase property that would not secure a mortgage in its existing condition with a mainstream lender
  • To bridge a shortfall of funding between buying and selling property when a sale is delayed

How much?

Short-term finance tends to be more expensive than longer term lending; however, with more and more lenders entering the market it is competitively priced. The interest rate charged will depend very much on the proposition in question.

However, with many different lenders in the market there is a wide variety of charging structures so, in addition to the interest rate borrowers may pay a variety of other fees to the lender.

Lender’s lending fee?

A fee is usually charged by the lender for providing the facility and is typically one to two per cent. In most cases, it can be rolled up into the loan.

Exit Fee

Exit fee may be charged by the lender when the loan is repaid. If charged, it is typically one month’s interest and is charged irrespective of whether the loan has run to its full term or not.

Surveyor’s Fee?

As with a standard mortgage, bridging finance must be processed with all the usual legal requirements. However, in some cases lenders have in-house lawyers and their costs may be included within the lender’s arrangement fees.

Typical Lending Criteria?

Bridging financiers will look at the credit profile of the borrower, the strength of the asset, the exit strategy and require that the borrower has a sufficient upfront cash contribution.

What are the risks

It is essential to establish a clear exit strategy to ensure the loan can be repaid (either via sale or re-mortgage) to avoid paying high penalty interest rates and possibly losing the property to repossession if the loan cannot be repaid. Borrowers should remember, just like a mortgage,

Which Lender?

There are several bridging finance lenders entering the UK market and choosing one can be a headache particularly as some bridging finance require a regulated lender. For landlords and property investors however, the type of bridging loan required is usually of the non-regulated variety so it is not essential to use an FCA registered lender. Most top bridging finance lenders are members of the Association of Short Term Lenders, a self-regulating body which operates a strict code of conduct to ensure that borrowers are treated fairly.

This is such a specialist area, it is always advisable to seek the services of a specialist broker or independent financial adviser such as Goldwyns Financial that understand the property, its location, the borrower’s circumstances and funding requirements and be best placed to match these components with the most suitable lender.

The Financial Conduct Authority does not regulate some aspects of commercial mortgages, buy to let mortgages, unsecured loans and bridging finance.

Property Services

Looking for property?

We have helped numerous clients source properties for residential or for investment

Do you want properties below market value?

Discounted property?

Do you want to build a buy to let property portfolio?

Our property sourcing service includes;

Discounted property.

  • We do due diligence including photographs, comparable and rent appraisals.
  • We do the negotiation.
  • Our sister company can assist with arranging the mortgage, refer you to reputable and reliable mortgage solicitors.
  • Hold your hand and deal with progression of the whole process.
  • Resolving any issues that arise.
  • Assist you with any other services required to complete the process.
  • Help you or with liaison with refurbishment and letting teams if buy to let.
Accounting Services

Accounting Services

  • Dedicated in delivering Accountancy, Tax, and Personal and Business Planning.
  • The service sector;
  • The professions;
  • The construction industry;
  • Manufacturers; and
  • Retailers.

The Partners and staff can offer a wealth of experience in all areas of Accountancy, Tax, and Personal and Business Planning.

We are Registered Auditors. The audit register can be viewed at www.auditregister.org.uk

We aim to offer a quality of service and degree of professionalism which belie our size. The Firm believes in direct contact with clients, who will always have access to the Partners when they require it.

We have long-established links with Professional Consultants, in the fields of tax, law and marketing with whom we deal on the more complicated cases.

In addition to traditional auditing, accounting and tax services we also provide advice on how to improve and develop your business. Whether you need an integrated business strategy, access to corporate finance or specialist tax advice we are here to help you achieve your goals.

We have established links with Associates in Milan, Dubai and Nigeria, and are now looking at Paris, Lyons, Warsaw and Shanghai.

Refurbishment Finance

Refurbishment Finance

Refurbishment loans are available to property investors, landlords and developers looking to upgrade a tired residential or mixed use property before renting it out. Refurbishments are

How is the loan structured?

Refurbishment finance is structured to provide funds in two tranches. The lender will provide an initial advance based on a percentage of the purchase price with the balance released post works and re-inspection. The actual loan amount is based on the projected value of the property post-refurbishment and the anticipated, achievable rental income.  

Contact Us

If there’s anything you’d like to ask us, get in touch with by filling out the form below.

But before you do, browse through our website where you’ll find answers to many questions about our products and services.

 

The Financial Conduct Authority does not regulate some aspects of commercial mortgages, buy to let mortgages, unsecured loans and bridging finance.

Our Address

109 Baker Street
Marylebone, London
W1U 6RP

Call Us

+44 (0) 207 935 1762

goldwynsfinancial.co.uk is a trading name of Goldwyns Financial Ltd, Registered Address: 13, David Mews, London, W1U 6EQ. Registered in England and Wales. No.08634065, which is authorised to arrange non-regulated buy-to-let mortgages by the Financial Conduct Authority. We are on the Financial Services Register No 780970 at https://register.fca.org.uk/
The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted.