Buy-to-let (BTL) mortgages are specifically for individuals who wish to buy residential property which they intend renting to tenants.
Eligibility and lending criteria
Most banks and building societies (and some other financial institutions) offer BTL mortgages, but terms, conditions and costs vary enormously.
Some mortgage providers will not lend to individuals who are under 25 years of age or earn less than £25,000 a year.
Flats, newly built property and former local authority-owned properties can be unacceptable to lenders. Lenders may also restrict the number of BTL mortgages a borrower can have with them at any one time. Or the lender may impose a ‘cap’ on the total amount of BTL funding they are prepared to advance to a borrower.
Affordability
Affordability for a buy-to-let mortgage is based on several factors which include:
- The property income (factoring for dormant months when there are no tenants in the property) and interest payable.
- Your existing income
- Your affordability for this type of mortgage product by considering your personal tax bracket as the income is taxable
- Potential other assets
Deposit
Typically, the highest loan-to-value (LTV) mortgage available on a BTL basis is 75% — i.e. you will need a deposit of at least 25% of the property’s purchase price to proceed. There is the potential for a deposit of less than the amount but this will be subject to your personal circumstances. Borrowers who are able to put down substantially more than the minimum 25% deposit (40%+ for example) will usually qualify for more favourable rates of interest.
Buy-to-let property – Stamp Duty obligations
When buying a property, there may be an additional cost paid to the government, known as Stamp Duty, which is dependent on the price of the property being purchased. When buying a property that will result in you owning more than one, a surcharge of 3% is added on top of the stamp duty you would normally be paying in England and Northern Ireland.
Arranging a buy-to-let mortgage can be complicated. We understand the requirements necessary to access a competitive buy-to-let mortgage and have helped many individuals to invest in property as a long-term opportunity.