Buy to let lending criteria

Buy to let mortgages are available to most people. Providing you have a minimum deposit

The minimum deposit you will need will be 25% of the purchase price.

Most professional investors borrow the maximum to keep their income tax liability to a minimum and to maximize the capital gearing effect (see investment page)

Buy to let lenders use different lending criteria to assess applications. All lenders require that the applicants have an independent source of income other than the rental income.

The lender will seek to ensure that if there is a problem with the tenant you have sufficient income to maintain the mortgage payments. 

Most lenders prefer that the main applicant is either employed or self employed. Lenders will typically require that employees have been with their current employer for at least 3 months. Self employed applicants should ideally have been self employed for at least 1 year.

Some lenders will specify a minimum earnings requirement. Not all lenders require proof of income. A mortgage broker is in a good position to advise over a particular lenders requirements

Most buy to let lenders have a minimum rental income requirement. Typically the market rental income will need to cover the mortgage payments (calculated on an interest only basis) by 125%. There are lenders that will accept just 100% cover of the mortgage interest only payments

Lenders will generally ask the surveyor to assess the market rental income.

You can ask a local letting agent for their opinion of market rental income, or you can gauge letting rents by looking in newspapers.

Most lenders assess rental income based upon the property being let as a single letting unit. This means the property being let to a family or to a couple sharing. You may achieve a higher rental income by letting out rooms individually but only a small number of lenders will accept this method of calculation. Please discuss this aspect with your mortgage broker

When looking at different types of property, be aware that that some properties are easier to mortgage than others. a multi-storey flat in a tower-block will be very difficult to mortgage. A flat over a shop (particularly a food shop) will present some problems. Mortgage lenders view these properties as the first to suffer in the event of a property downturn.

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