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Travelling & Relocation 25 March 2022

How to get a UK buy-to-let loan

The UK remains a popular investment destination despite the challenges that Brexit and COVID pose to the UK economy. This is especially true of the country’s resilient residential property sector that recorded double-digit price growth in 2021.

Expectations are that this trend may continue into 2022 and beyond if market demand continues to outstrip supply.

The strong price performance presents investors in the buy-to-let property market with a conundrum: rising prices might push the ideal property beyond their reach, although appreciating values are precisely what they’re looking for in an investment property.

The latest market intelligence from real estate consultancy Knight Frank shows that London is firmly back in favour with Marylebone (86%), Belgravia (85%) and Mayfair (78%) showing the biggest increases in prospective new buyers in 2021.

Meanwhile, the number of offers accepted in prime central and prime outer London hit a ten-year high, and market valuation appraisals were the highest for November in 10 years.

It’s no wonder then that a growing number of investors are looking to add an international buy-to-let investment to their portfolio. So, what does it take to buy a property, and how feasible is it?

What are the qualifying criteria?

Loans on buy-to-let properties are available throughout the UK to qualifying buyers, although eligibility for a UK property loan as an international buyer differs slightly from a traditional home loan or mortgage. This is because of international financing rules that preclude investment from a small number of countries, but which shouldn’t pose a hurdle to the majority of investors interested in the UK property market.

Before continuing with your application, you’ll be asked a few simple eligibility and suitability questions, as well as some of the financial details related to the property you’re considering buying.

We pride ourselves on being able to tell you in our initial engagement whether you qualify based on the basic, non-financial requirements. This means your time is not wasted if your application is likely to fail on technical grounds.

If you pass the initial eligibility test, we then need financial details such as the asking and purchase price, size of the loan required, expected use of the property and anticipated rental income.

Take note that you’ll be ineligible for a UK property loan as a non-resident if you intend to occupy the property. Our UK property loan is intended purely for investment property that will be let to tenants.

What are the terms of a buy-to-let loan?

Once you pass the eligibility criteria, it helps to learn more about the unique characteristics of a UK property loan.

As already highlighted, it has to be as an investment property that you intend to let out and not reside in. You’ll also only be eligible for a loan up to 65% of the value of the property or the purchase price, whichever is lower.

This arrangement lowers your risk and also helps you meet another crucial requirement that the rental income covers 125% of your interest payments.

Which brings us to the loan repayment terms. With a UK property loan, terms are offered as interest only, meaning you only cover quarterly interest repayments. Over the life of the loan you are not required to repay the capital amount, unless you choose to do so.

In most cases, clients settle the loan amount when they sell the property. However, you’ll need to keep a cash deposit equal to six months’ interest in an account you hold with us.

Unlike many other institutions, you don’t pay an early redemption penalty if you happen to settle the loan before the loan period expires. An early redemption penalty is sometimes charged by borrowers if you settle the loan initial expiry date.

What are the legal, tax and cost ramifications?

There will undoubtedly be tax implications related to your property investment and the returns that you earn. The extent of your tax obligations will depend on many factors, so you should alway get tax advice from a suitably-qualified professional.

When buying the property, you’ll also be liable for the Stamp Duty Land Tax, which is calculated on a sliding scale for properties over £125 000. This ranges from zero up to 12%. Independent legal advisors can help you calculate and pay any appropriate duties and assist with any other legal aspects of your purchase.

Also, be aware that you’ll be liable for additional costs apart from the financing fees. This includes the cost of solicitors and property valuers employed to complete the transaction for yourself and the Bank.

What is the application process and costs?

As you’d expect with any loan application, you’ll need to complete and provide a standard set of supporting and identifying documents.

If you’re not an existing Standard Bank International client, then the first step will be to sign on as a client and open the necessary bank accounts and facilities. This is followed by the loan application process for which you’ll need to complete the application form and provide proof of your financial standing.

This is a thorough process, particularly if you have assets and liabilities around the globe that have to be considered during the due diligence tests. Institutions like Standard Bank International that are committed to service excellence will lend a hand to guide you through the process and ensure all the boxes are correctly ticked.

Once completed, your application and supporting documentation are reviewed by our credit committee, which should be able to respond with an answer in a few working days.

The simplest way to enquire or start your application process is to speak to your relationship manager or to call our contact centre on +44 (0) 1624 643700, or +27 (0) 860 333 383 for South African residents.

Important Information

This document is not designed to be distributed to UK residents and must not be acted on or relied on by persons who are UK residents. Standard Bank Isle of Man Limited is not regulated in the UK to provide home mortgages and nor is it licensed to provide consumer credit to UK resident individuals. Terms and conditions apply. Visit www.standardbank.com/terms for more information. This document is issued by Standard Bank Isle of Man Limited (“SBIoM”). SBIoM is licensed by the Isle of Man Financial Services Authority. Standard Bank House, One Circular Road, Douglas, Isle of Man, IM1 1SB. Registered in the Isle of Man No. 4713C. SBIoM is part of Standard Bank Group Limited; incorporated in South Africa and regulated by the South African Reserve Bank as a Bank controlling company. SBIoM places funds with other parts of its group and thus its financial standing is linked to that of the group. Publicly available information, including reports and Accounts, is available at www.standardbank.com/international. Deposits made with SBIoM are covered by the Isle of Man Depositors’ Compensation Scheme as set out in the Depositors’ Compensation Scheme Regulations 2010. The Isle of Man has a Financial Services Ombudsman Scheme covering disputes relating to financial services offered in or from the Isle of Man to individuals and trustees or managers of SIPPs. Standard Bank Offshore Services (RSA), operates under the license of The Standard Bank of South Africa Limited (“SBSA”), an authorised Financial Services Provider (“FSP”) number 11287. We are authorised to provide financial services for the following products: Long-Term Insurance A, B1, B2 and C; Short-Term Insurance: Personal Lines and Commercial Lines; Retail Pension Benefits; Securities and Instruments: shares, money market, debentures and securitised debt, warrants, bonds, and derivative instruments; Collective Investment Schemes; and long and short term Deposits. The compliance department can be contacted on +27 11 636 1781 or by email at [email protected] SBSA holds professional indemnity insurance cover. SBSA is authorised by SBIoM to sell its products in South Africa and other African countries. Other local Standard Bank Group entities are similarly authorised within their own countries. All transactions to the Account must be in line with Current Exchange Control Legislative requirements applicable to the country in which you are resident or working. Telephone calls may be recorded. Please refer to the Standard Bank Offshore Group Client Privacy Statement available from: www.standardbank.com/international RMC2021.132 GMS-4248 08/2018/P27