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 typically 15% of the
purchase price (10% with some lenders).
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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types |
