A buy to let mortgage is a mortgage where the lender knows from the outset that you intend to rent out the property. A standard buy to let lease will allow an Assured Shorthold Tenancy (AST) to be in place, so you can rent to a couple for example. If you intend to rent the property out on a per room basis, you may need a multi-let or HMO mortgage.
How much deposit do I need for a buy to let property?
The standard deposit for a buy to let mortgages is 25%, however, there are a few specialist lenders available via mortgage brokers that allow a 15% deposit. The key here is making sure the rental income is sufficient to cover the Mortgage with an adequate surplus.
How to get a buy to let Mortgage
Over 50 lenders are offering Buy to Let mortgages and most will have different criteria to meet to see if you qualify, for example, they may insist the applicants earn a minimum income of £20,000, they may ask that you or any close family member has never lived at the property, or you may have to have a high credit score. To compare the market and find out the most suitable Mortgage, you should seek advice from a mortgage broker who can give you the information in this area.
How much can I borrow on a buy to let mortgage?
Buy to let mortgage lenders will typically lend you 75% of the purchase price or valuation (whichever is the lower figure). Some specialist lenders can give you up to 85% of the purchase price or valuation (whichever is the lower figure) – These lenders are available through mortgage brokers. How much you can borrow is dependent upon the rental income you will achieve. Lenders have many different ways of calculating how much you can borrow. For example, you may be able to borrow more if you take out a five-year fixed rate instead of a two-year fixed rate or some lenders will want 125% rental coverage, whereas others may want 145% rental coverage. The best way to find out what is available in the market, which lenders allow the maximum borrowing etc., is to speak to a specialist Buy to Let mortgage broker.
Can I change my Mortgage to a buy to let Mortgage?
You could speak to your existing mortgage provider and ask for permission to let out the property – some lenders do grant consent. If the lender refuses permission, or you would like to capital raise, you could arrange a new buy to let Mortgage replace the existing Mortgage on the property.