Getting a buy-to-let mortgage in Scotland can seem like a chore, as arguably they’re not as common there as the rest of the UK.
The number of lenders offering buy to let mortgage in Scotland is smaller than in England or Wales.
Further, most lenders will apply some kind of postcode restriction, such as lending only on the mainland or some islands.
This means if you’re eyeing a property in an offbeat location in Scotland, you might find it hard to settle on a lender. But we’re here to help you out, so let’s stop worrying and get started.
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How Is A Scottish Buy-To-Let Different?
When looking for a buy-to-let mortgage in Scotland, it’s essential to understand the differences between processes in Scotland and the rest of the UK.
But there are also some similarities. In this section, we’ll talk about both across multiple aspects.
1. Landlord Registration
You must register as a landlord in Scotland and England before renting your property. Usually, you’ll need to get this done with the local council regarding the property’s location. This requirement does vary across different local authorities in Scotland & England.
There’s a principal fee of £75 and an additional fee of £17 per property. You might also be eligible for discounts if you own several properties across multiple locations. Once again Landlord registration varies based on the local authority across Scotland & England.
2. HMO Licensing
If you’re renting out a property to more than two unrelated tenants who are not family members, you may need to apply to the local council for an HMO licence (again different locations will have varying rules). This rule applies to both Scotland and England.
3. Landlord Accreditation
This is not usually a legal requirement but can make it easier to rent out property and reassure tenants.
You can apply to the Landlord Accreditation Scotland to get this accreditation in Scotland.
England, however, doesn’t have a single scheme for this, so as a landlord, you can apply to one of many, such as the London Landlord Accreditation Scheme.
4. Right To Rent Checks
In Wales and England, the landlord is required to perform Right to Rent checks to ascertain if the tenants are legally allowed to rent in their region. In Scotland, the landlord is not required to perform any such check.
5. Tenancy Deposits
Tenancy Deposit Protection works similarly in both England and Scotland. This means you need to protect tenancy deposits through a registered scheme, which must be done within the first 30 days after the tenancy commences.
The primary difference here is that in Scotland, the registration needs to be done using the following Scottish schemes rather than the ones in England:
- Mydeposits Scotland
- Letting Protection Service Scotland
- Safe Deposits Scotland
6. Property Taxes
Just as you need to pay stamp duty to the HMRC while purchasing a buy-to-let property in England, in Scotland, the equivalent is the Land and Buildings Transactions Tax paid to Revenue Scotland.
Both rates are naturally different, but one similarity is that second homes, including buy-to-lets, attract an additional 3% tax. This is called the Additional Dwellings Supplement (ADS) in Scotland.
The rates for LBTT and ADS are as follows:
| Property value | LBTT | LBTT+ADS |
| Up to £145,000 | 0% | 3% |
| £145,001 – £250,000 | 2% | 5% |
| £250,001 – £325,000 | 5% | 8% |
| £325,001 – £750,000 | 10% | 13% |
| Over £750,000 | 12% | 15% |
Buy-To-Let Mortgage Process In Scotland
As mentioned above, the number of lenders offering buy-to-let mortgages in Scotland is limited. So, we recommend working with an experienced mortgage broker to get the deal you need.
They not only help you with choosing the best product but also help with the application process steps, such as:
1. Deciding The Owning Entity
The first thing you need to know about a buy-to-let mortgage in Scotland is whether you’ll own the property personally or through a company. Many people choose the latter due to tax benefits.
To get a Scottish buy-to-let mortgage through a limited company, you must first register an SPV with the Companies House. This might be a complex process, so it’s best to get a broker to help you.
2. Preparing A Rental Business Plan
Buying a property to generate rental income is essentially a business, and the acceptance of the mortgage application depends on whether you have a proper business plan in place.
This does not need to be overly complex; it should be just one that demonstrates the rental income will be enough to pay off the debt.
You’ll also need to factor in the area of Scotland where you purchase the property, as this will determine the local rental rates.
Further, you’ll need a plan to continue payments even when you don’t have tenants.
3. Preparing the Documentation
You must organise the application documents once the above two are in place. These will include ID proof, rental projections, deposit proof, etc. Your broker can also help you with these steps.
Best Areas To Purchase Rental Property In Scotland
For buy-to-let properties, the return on investment, or ROI, is usually calculated as the rental yield, which is the percentage of the property’s value you earn in rental income annually.
In Scotland, the following areas have the highest average rental yield:
- West Dunbartonshire (9.05%)
- Renfrewshire (8.96%)
- East Ayrshire (8.58%)
However, rental yield is not the only deciding factor here; other aspects, such as transport availability and neighbourhood quality, also play an essential role.
At the end of the day, it all depends on a balance of everything that appeals to your unique needs.
We’ve recently published a research article withthe best buy-to-let areas in UK. Make sure to read it here.
Frequently Asked Questions (FAQs)
1. Are let-to-buy mortgages available in Scotland?
Yes, let-to-buy mortgages are available in Scotland from major lenders such as Metro Bank and TSB. And in case you’re wondering what they are, here’s a brief explanation.
A let-to-buy mortgage is for borrowers who want to buy a new home but want to rent out their current house. In this case, the mortgage is issued against the old property.
2. Is the borrower’s age a deciding factor for issuing mortgages in Scotland?
Usually, most lenders in Scotland will allow you to take a mortgage as long as you’re over 18. There’s no maximum age limit, but the earlier you take out the mortgage, the easier it will be for you to pay off.
Your home may be repossessed if you do not keep up repayments on your mortgage.
All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.
I am CeMAP & CERER qualified mortgage adviser and have helped a number of clients realise their dreams when they thought it would not be possible. I’m skilled at getting mortgages sorted for people with a history of missed payments, CCJs, defaults, debt management programmes, IVAs and bankruptcies.
