There has been no such thing as ‘normal’ in the buy to let mortgage market over the last year. High inflation, an uncertain economic outlook and turbulent money markets have meant that buy to let rates and product availability, in some instances, have changed on an almost daily basis.
As a landlord, there’s not much that you can do to influence the macro-economic environment, but you can take steps to ensure that you are in the strongest position to achieve the best rate on your buy to let mortgage, particularly if lenders continue to withdraw products and change rates at the pace they have done over the last 12 months.
It has never been more important to be ‘document-ready’ at the point you start considering a new buy to let mortgage. For remortgages, this is something you should start thinking about as you approach six months from the end of your existing product.
Lenders will require a full application to be submitted to reserve a rate and, even then, many will also apply additional deadlines by which they expect to receive any supporting documentation. This means that, if you are not ready to provide all the information required to complete a full mortgage application, or if you delay in providing the supporting documents, you could miss the deadline and, if rates then rise, you could be left paying more for your buy to let mortgage than you had initially anticipated.
So, what can you do to be prepared and be document ready?
We suggest it’s a good idea that all landlords keep a secure folder on their computer which includes scans of original documents and files typically required by buy to let mortgage lenders. I’ll provide information on what you need to think about, and why, a little later in this article. But first, there is something to consider that can often catch out landlords, particularly at this time of year.
Landlords need to file a tax return to declare the income they earn from their buy to let investment, alongside any other income earned throughout the year and lenders will request to see these tax documents as part of a mortgage application. They do this so they can understand the tax structure of the investment and to cross reference the documents to ensure that everything is consistent and aligns with the information provided within the mortgage application.
The documents a lender will want to see are the Tax Return (SA100), Tax Year Overview and the Tax Calculation (previously known as SA302).
With the tax year beginning on 6th April, tax returns for 2022/2023, don’t need to be filed ahead of the deadline on 31st January 2024, which is also the deadline for paying the tax due during this period. However, as it gets closer to this deadline, many lenders will ask to see the documents relating to 2022/2023 rather than the previous year even though there is no obligation from HMRC to have submitted a tax return before the deadline. This is because it gives the lender a more up-to-date picture of an applicant’s finances and, if income has increased during the last year, it could also benefit you as the applicant.
This means that if you still haven’t submitted your tax return for 2022/2023, you should think about doing ahead of making any mortgage application in the coming months. Failing to do so before applying for a mortgage could mean the lender requests the latest documents, leading to delays and possibly missing out on a rate.
So, what do you need to think about to be document-ready for a buy to let mortgage? Here are some of the documents that are commonly requested by lenders:
How to be document-ready
Tax Documents: You should have three tax documents each year and most lenders will require your two most recent years:
- Tax Return (SA100)
- Tax year Overview
- Tax calculation (previously known as SA302)
If you are employed, 3 months’ payslips and P60 and, if you are in receipt of a pension, your Pension P60.
Portfolio information
If you own four or more mortgaged buy to let properties, a lender will want to assess the income and expenditure on the properties you hold in your portfolio and will ask you to provide up-to-date property portfolio information. Other documents may be required dependent on the lender.
Bank statements: Three months rental bank statements, showing the rental being paid into the account each month.
ID documents: Proof of your identity, which can be a scan of your driving licence or passport. Make sure that these documents are still valid and not beyond expiry. In addition, provide documents to prove your address. These can be your recent utility bills or bank statements if they are in the last three months.
EPC: A valid and up-to-date EPC for the property, which can be checked on the government website.
By being prepared and having immediate access to the documents required by lenders, you will give yourself the strongest possible chance of securing a mortgage with the best rate for your circumstances. Having a secure folder on your computer containing all these files will also make the process smoother and less stressful, enabling your mortgage adviser to act quickly and meaning you don’t have to spend time worrying about your buy to let mortgage.
Frequently Asked Questions
What does being “document-ready” for a buy-to-let mortgage mean?
It means having all the documents lenders usually ask for scanned and stored in a secure folder before you apply. Many lenders need a full application to reserve a rate and set deadlines for supporting documents, so being ready helps you avoid delays and stops you missing out on a rate if prices rise.
When should I start preparing documents for a buy-to-let remortgage?
Start thinking about your documents as you approach six months before your current product ends. That gives you time to gather everything you need so you can apply quickly when the right rate becomes available.
What tax documents do buy-to-let lenders ask for?
Lenders usually want your two most recent years of three tax documents: your Tax Return (SA100), your Tax Year Overview and your Tax Calculation (previously known as the SA302). If you’re employed, you’ll also need your last three months’ payslips and your P60, plus a pension P60 if you receive a pension.
Why do buy-to-let lenders want to see my tax returns?
Lenders use your tax documents to understand the tax structure of your investment and to check that everything matches the information in your mortgage application.
Should I file my tax return early before applying for a buy-to-let mortgage?
It’s often a good idea. As the filing deadline approaches, many lenders ask for your most recent tax year’s documents, even though HMRC doesn’t require you to file until the deadline. If you haven’t filed yet, the lender may ask for them, which can cause delays and could mean missing out on a rate. More recent figures can also help you if your income has increased.
What extra information do portfolio landlords need to provide?
If you own four or more mortgaged buy-to-let properties, lenders will want up-to-date details of your property portfolio, including the income and expenditure on the properties you hold. Some lenders may ask for further documents.
What other documents should I have ready for a buy-to-let mortgage?
Have three months of bank statements showing rent being paid into your account, valid photo ID such as a passport or driving licence, proof of address dated within the last three months, such as a utility bill or bank statement, and a valid, up-to-date EPC for the property.
At 3mc, we have a team of expert advisers who can discuss all your mortgage requirements. If you would like to discuss your options, give the 3mc team a call on 0161 962 7800.
All calls are recorded for training and monitoring purposes. 3mc for intermediaries only.
*Your home may be repossessed if you do not keep up repayments on your mortgage. 3mc (UK) Ltd is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register https://register.fca.org.uk/s/ under reference 302992. Please note: The FCA do not regulate Business Buy to Let Mortgages.
About the Author: Doug Hall, Director at 3mc
This article was written by Doug Hall, a Director at 3mc, one of the UK’s leading mortgage packagers, distributors and brokers. Doug has over 35 years of experience in the mortgage and specialist lending industry, giving him an unparalleled understanding of the challenges and opportunities facing landlords, brokers, and property investors across the UK. A recognised voice in the industry, Doug regularly speaks at major industry events and is widely respected by lenders, intermediaries, and fellow professionals alike. His insight is shaped by three decades on the front line of mortgage distribution, working closely with the brokers and lenders who keep the UK property market moving.