Rent Potential
The decision any mortgage lender will make as to whether or not a mortgage will be offered / how much money they will lend, is usually based on the rent you will earn and not your income. Some lenders will calculate the rental income on 125% – 130% of the monthly mortgage payment at a nominal rate of between 5% & 6%.
Does it Matter How Much I Earn?
No, FFP has access to lenders who have a no minimum income rule and base their decision on the rental income the property may achieve however, the majority of lenders do require you to have a minimum income of more than £25,000 per annum.
Interest Only
Yes, you can have interest only on a buy to let mortgage no matter what the loan to value is. Unlike residential mortgages, most buy to let mortgages are not regulated and are therefore not subject to the same interest only criteria that residential mortgages are subject to.
Interest Rate
Buy to let mortgages typically have slightly higher interest rates than residential mortgages.
Larger Deposit
Typically, a minimum of 20% – 25% is required.
Repayment Method
Is typically on interest only, but you can have a buy to let mortgage on capital repayment.
Capital Growth
In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity from the second property as it increases in value over time? The decision may affect the type of property you purchase and whether you choose interest only or a capital repayment mortgage.
Can I have More than One Property?
Yes – you can take out multiple mortgages with different lenders – but in most cases, it is only possible to have one loan per property. This is because the loan is secured on the title of the property – and each lender would want to have first claim – should anything go wrong!
Can we get a Buy to Let Mortgage in Joint Names?
Yes, you can.
Can I get a Buy to Let Mortgage in the name of a Limited Company?
Yes – although often lenders expect that the Limited Company is formed for the sole purpose of purchasing, owning, and managing properties – an SPV (Special Purpose Vehicle). See our dedicated Limited Company buy to let page for further information.
Are Buy to Let mortgages regulated?
Most buy to let mortgages are not regulated by The Financial Conduct Authority, however as of 21st March 2016, some forms of buy to lets transactions are now regulated. These are known as “Consumer Buy to Lets”. Consumers buy to let landlords are in essence landlords that become landlords by accident. Examples of these are those who inherit a property that is let out and those who move house but decide/need to retain their existing property as a buy to let. These type of transactions are assessed according to the same strict affordability rules as a residential mortgage.
What is a Portfolio Landlord?
If you have 4 or more mortgaged buy to let properties, then you are classed as a portfolio landlord. These include properties held in a single name, joint names and a limited company. If you fall into the category of a portfolio landlord then you will be subject to additional stress tests which includes stressing the rental cover of the whole portfolio and not just the property that you are buying or refinancing. You may also be subject to more paperwork, which can include:
