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Buy To Let Mortgage Fees

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 12, 2022

Buy to let mortgage fees

Customers often ask us if a buy-to-let residential mortgage is a good investment.

This question is based on many factors. However, prospective investors need to establish the rental yields as well as the cost of the investment.

You’ve come to the right place if you are unsure of the fees associated with a mortgage buy-to-let.

This article will overview the typical buy-to-let fees and legal costs associated with mortgage products.

Our expert mortgage brokers on the financial services register will introduce you to lenders who will ensure you the best mortgage deal.

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Pay to rent

Buy-to-Let Mortgages in the UK usually include…

  • Broker fees
  • Lender application/booking fees
  • Valuation fees
  • Fees for mortgage products
  • Exit fees for mortgages

Broker fees for buying to let

It all depends on the complexity

The complexity of your mortgage and the type of product you are taking out can affect the fees that brokers charge. Buy-to-let purchases are more straightforward for those who are not portfolio landlords and have less than four properties.

Since the PRA changes, buy-to-let transactions have become more complex. This has led to many brokers deciding to stop handling customers who are interested in buy to let. Since brokers still receive the same amount from mortgage lenders, most will charge a fee to handle a buy-to-let deal.

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What broker fees can you expect?

Brokers don’t usually charge Buy To Let mortgage fees, but they do for large loans. Others might charge around £500-999. A few may ask you to pay up to 3-4% of the loan amount.

Different fees can apply to buy-to-let secured loans

Broker fees for buy-to-let secured loans and second mortgages are generally higher than standard residential deeds. This is something that homeowners who already own homes should be aware of.

Application/booking fees for Buy to Let Lender.

This applies to upfront fees that are payable before or upon mortgage application. Different lenders will charge these fees. While some lenders offer buy-to-let mortgages without upfront fees, others may require payment of up to £500. Some providers believe upfront fees attract borrowers willing to see the deal through.

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Valuation fees for buy-to-let

They depend on the property type, location, and mortgage product you are interested in. While some buy-to-let mortgage deals offer a basic valuation for free, you can expect to pay more if you are a home buyer or undergo complete structural surveys. These can be free or as high as £3,000+ for properties with a purchase price of multiple-million-dollar size.

Mortgage product fees for those who buy to let

Again, the fees for mortgage product products will vary depending on product type and property values. Some lenders offer buy-to-let mortgages without fees, while others charge between £500 and £1,500. Others take a percentage from the loan to value amount.

Finding a lender with no fees or a fixed rate for larger loans may be cheaper.

Mortgage exit fees can be avoided by purchasing to let

Exit fees, not to be confused with early repayment costs, are charged by some lenders for specific products. They can be charged to any borrower who closes an account, regardless of whether it is tied in or untied. These fees are usually small enough to cover administrative costs. They range from zero to £300 (a few may be more).

Refinance early by buying

Most mortgage deals include early repayment charges (ERCs). These charges are charged to customers who have been tied into a rate for a period of attractive interest. This applies to fixed-rate mortgages but can also be used for tracker/variable rate products. However, some lenders offer mortgages that have no early repayment fees.

ERCs protect lenders if someone leaves a product for whom they have priced the profits over a full term. This is because there is a lot of expense involved in underwriting and securing funds being lent.

ERCs tend to decrease towards the end of the rating period.

Let us know if you are interested in purchasing to lease

Legal fees for buy-to-let mortgages include disbursements, solicitor fees, and stamp duty. Legal fees may also apply if you are remortgaging to purchase.


Costs for Solicitors to be hired

Costs for a solicitor vary depending on how they bill. Some charge fixed fees while others charge by the hour. A few conveyancers may also charge a percentage of the loan amount.

As an incentive to borrowers, some lenders waive legal fees, most often on remortgage agreements.

Enquire here today to be introduced to a mortgage provider.

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Stamp duty to be purchased.

As part of the 2017 Budget, the UK government implemented stamp duty reforms. Most landlords who buy to let property must now pay an additional 3 percent.

The primary residence at £275,000 is usually priced at £3,750. However, in these circumstances, you can now buy it as a second or investment property for £12,000.

Although buy-to-let properties are no longer considered lucrative short-term investments, this doesn’t mean that you can’t turn a profit. Contact one of our buy-to-let brokers to discuss your plans in the buy-to-let sector.

Allow income tax reform to be purchased.

The 2017 Budget introduced income tax reforms that capped landlords who buy to let can claim tax relief.

These measures will be implemented in phases starting in the current fiscal year. They will mainly impact landlords who are in higher income tax brackets. A buy-to-let property that generates £500 per month in rental income now qualifies as £6,000 per year, regardless of how much the landlord pays for mortgage interest, management, and maintenance costs.

This is something that all investors in buy-to-let should know. We recommend speaking to your accountant or tax advisor if you plan on purchasing or moving a property through limited companies.

Other costs can be purchased to lease

Buy to let investors should also take into account ongoing property maintenance costs. These costs usually include…

  • Fees for a letting agent
  • Income tax

Agent fees are typically charged at either a fixed rate or a percentage of rental income. The latter is generally charged at 10% of the monthly rent.

For example, a £350pm rental will come with a monthly fee that’s £35.

Income tax can vary depending on your income and the tax rate paid. For help in determining your buy-to-let tax, we recommend consulting HMRC’s website.

Buy to Let Mortgages without Fees

Investors and home buyers looking to lower their initial costs are attracted to fee-free buy-to-let mortgages.

It sounds great, doesn’t it? But what’s the catch? Fee-free buy-to-let mortgages in the UK usually come with higher interest rates. This is the main disadvantage to consider. You must calculate the savings on fees versus the loss from lower interest rates.

Remember, however, that a buy-to-let mortgage will not exempt you from any fees related to the product. The legal and valuation fees will still be payable.

Do I need to make a bigger deposit to get a fee-free Buy To Let mortgage?

A borrower does not need to deposit a more significant amount to get a buy-to-let mortgage without an arrangement fee. These products typically come with a variety of loan-to-values (LTVs), so a smaller deposit is unnecessary. It is possible to get a BTL mortgage without fees and with various deposit sizes, provided you meet the affordability requirements.

Remember that the total cost of the mortgage is what’s important and not the upfront amount. After the interest rates are accounted for, it may be that a buy-to-let mortgage with a low monthly fee is better than a mortgage with no payments.

Learn more about buy-to-let deposits.

Is a mortgage for buy-to-let cheaper than a residential one?

Not necessarily. Due to higher risk, buy-to-let mortgages are often subject to higher fees and interest rates.

BTL mortgages can be more expensive than traditional ones, but that doesn’t mean they are difficult to find. Contact us to enquire, and we will connect you with the best lender to help you get a buy-to-let mortgage at a favourable rate.

Ask a mortgage expert about buy to lets

You can ask our whole-of-market advisers for help if you are unsure which option is best for you. They will match you with the right broker to handle your mortgage application.

You can call to discuss any topic or submit an enquiry online.

Relax, and let us find the right mortgage broker for you. There is no charge and absolutely no obligation to improve your credit rating.

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