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Eligibility Criteria for a Buy to Let Mortgage

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 28, 2022

Here, we have provided an overview of the buy-to-let mortgage eligibility criteria UK lenders use to assess aspiring borrowers, as well as information that will help you decide whether this mortgage product is the right option for you. Plus in our FAQ section, we’ve fielded some of the questions we heard most often about buy-to-let mortgage eligibility.

Buy to let mortgage eligibility criteria in the UK

Buy-to-let mortgages can be difficult to obtain for applicants who don’t own a residential home, but it’s not impossible. Most mortgage lenders have strict eligibility criteria but some are more flexible. For instance, some are happy to deal with limited companies and a poor credit history isn’t the end of the world if you know which lender to approach. In these scenarios, having access to the whole of the market is essential and the advisors we work with have exactly that, so make an enquiry to be connected to the best buy to let mortgage broker for someone in your circumstances.

Most UK lenders will take the following into account when assessing whether an applicant meets their buy to let mortgage eligibility requirements…

General criteria

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Income and affordability criteria

Where affordability is concerned, some lenders insist on a minimum income requirement for a buy to let mortgage – £25,000 is standard – especially if you’re a first-time landlord.

Other lenders will accept borrowers with lower personal income, but it is also possible to find a BTL provider that will impose no income requirements, instead basing the deal on the property’s rental potential – as long as it will cover the mortgage payments by 125-130% (more for higher rate taxpayers), most lenders will be satisfied.

Your income type could also be taken into account

Buy to let lenders who have minimum income requirements may also be interested in how you make your money. A substantial PAYE salary is the most desirable from their point of view, but that doesn’t mean it’s impossible to find a favourable deal if you’re looking for a self-employed mortgage, or you’re contracting, in receipt of pension income or other benefit income.

Do you need to prove income for a buy to let mortgage?

Lenders who have specific income requirements for buy-to-let mortgages will expect you to prove that you earn the minimum amount. If you’re self-employed, most lenders will ask to see three years’ worth of accounts, but some will be satisfied with two, a few one and a handful just one month.

If a portion of your income is made up from supplementary capital, e.g. bonuses, commission and benefits, a specialist lender may be required as not all providers take these into account and others impose caps on the amount they will include.

Most lenders will want to be confident that your forecast rental income will cover the mortgage payments. To prove this, you will need to obtain a letter from a letting agent that has the approval of the Association of Residential Letting Agents (ARLA).

The lender may also consider your outgoings

When assessing your affordability, the lender may also offset your income against any other outgoings you have, such as outstanding loans. Having significant outgoings could see the provider cap the amount you can borrow.

Deposit criteria

On average, buy-to-let mortgages require a larger deposit than residential. The typical maximum loan to value (LTV) ratio for a buy-to-let mortgage sits at 75%, though you will find specialist lenders out there offering 80% and even 85% under the right circumstances, if you search the entire market. This means that you will need a deposit of at least 15%, and in some cases even more than that.

There are factors which affect the amount of deposit the lender will request. For instance, bad credit and non-standard construction are variables that can make a mortgage agreement higher risk, so the provider may ask you to put down a larger lump sum to safeguard themselves.

The source of your deposit will also be relevant, as it may restrict the number of approachable lenders. Those with uncommon deposit sources, such as cash savings and overseas investments should seek specialist advice.

Credit history

Applicants with poor credit history should seek out the lender who offers the most flexibility to someone in their circumstances.

Some UK mortgage providers are wary of customers with no credit history, those with county court judgements against their name and borrowers with individual voluntary arrangements (IVAs), as well as those with a track record of late payments or defaults.

If you’re seeking a BTL mortgage with adverse credit against your name, the good news is there are specialist lenders who handle prospective borrowers with these issues every day, and the advisors we work with are experts in this field. They can connect you with the lender most likely to offer a favourable deal.

What are the mortgage requirements for professional landlords?

Established landlords are generally more likely to pass a lender’s buy-to-let mortgage eligibility checks than a first-time buyer, but some providers are wary of borrowers with large portfolios and draw the line at four buy-to-let mortgages. These customers would be classed as portfolio landlords. A few, however, have no buy-to-let limits in this regard.

Is there an age limit for buy to let landlords?

Age is a factor some lenders might consider when determining buy-to-let mortgage eligibility. The minimum age of applicants in the UK is 18, but some providers refuse to deal with borrowers under 21 or 25.

At the other end of the scale, some will only lend to applicants up to age 75, but for others, the cap is 85, and a minority of lenders list no age restrictions whatsoever in their buy-to-let mortgage criteria.

Property usage

Property usage could also be a crucial factor in the lender’s eyes. Most mortgage providers will gladly lend to someone planning to offer single assured short-term tenancies, but a more specialist lender, like the ones the advisors we work with can connect you to, may be required for buy to lets on houses with multiple occupants (HMOs), student flats or holiday/short term lets.

Repaying a buy-to-let repayment mortgage using rental income

When it comes to negotiating the term, make sure you set it against your repayment plan. If you will be using income from tenants to settle the loan, work out how long it will take to pay off the balance via their monthly rent.

For instance, it would take 18 years to pay off a £100,000 mortgage with 4% interest using rental income of £650 per month. Obviously, this only applies to BTL repayment mortgages, unless you’re intending to make overpayments.

Selling the property to settle the debt

If you’re planning to sell the property to settle the outstanding amount, taking out the longest term possible may be the most feasible option. This way, you’re giving the property the chance to increase in value and therefore cover the entirety of the loan plus profit when it changes hands.

There are, of course, other ways to settle your end-of-term debt, such as through the sale of another property, endowment policies and stocks and shares, and the advisors we work with can determine whether one of these repayment vehicles might be a better fit for you.

Talk to a buy to let expert today

If you have questions about buy-to-let mortgage criteria or are ready to apply for one of these products, you should start with professional advice from a broker. The right broker will be able to assess your eligibility and search the entire market for the best buy-to-let mortgage that you qualify for. Along the way, they will offer you bespoke advice and help you with any paperwork.

We offer a free broker-matching service that will pair you up with a full-vetted expert who has a strong track record helping customers just like you get a buy-to-let mortgage. Call us today on 0808 189 2301 or make an enquiry online and we’ll set up a free, no-obligation chat between you and a broker who could help you save time and money today.

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Who can get a buy to let mortgage?

In a nutshell, anyone who meets a buy-to-let lender’s affordability and eligibility requirements! Generally lenders prefer BTL applicants to already own a property, however, more lenders are recognising the need for first-time buyer BTLs or for those who have accommodation provided by their employer but still wanting to buy a property for investment.

Factors including bad credit, age, property type and income might rule some applicants out, depending on which lender they approach, but with whole-of-market access on your side it may be possible to find a specialist provider whose buy to let mortgage criteria, terms and conditions are flexible enough to offer you a favourable deal.

How much can I borrow?

In order to establish whether a buy to let mortgage is affordable to somebody in your circumstances, you must first consider how much you’re able to borrow, and this is a little more complicated than with residential mortgages.

Will I still be eligible if the rental valuation falls short?

If the rental valuation of the property is not high enough, the loan to value (LTV) may be lower, so the overall investment must demonstrate that the mortgage payments are supported by the rental income to an appropriate amount.

The way this is calculated can vary across the lender spectrum, though most insist that the rental income is between 125% and 130% of the mortgage payments, and they work out the mortgage payments using either the actual rate applied for (pay-rate), or at a set rate of 5+%.

Example: A £75,000 mortgage with a rental assessment of 125% at 5% interest…

£75,000 x 5% = £3750/12 (months) = £312.5 x 125% =  £390 rental income required.

This means carrying out some number crunching, but don’t worry, the advisors we work with will do the maths for you and establish whether you meet the typical buy to let mortgage affordability criteria that most UK lenders insist on. Even if you don’t meet the criteria there may be other options.

Could top-slicing help me qualify for a BTL mortgage?

Top-slicing is when a lender uses a borrower’s personal income to top up any shortfall in the rent to make up the loan amount they need. This could be an option if the projected rental income does not cover enough of the mortgage payments.

A limited number of lenders are willing to use top-slicing, and they will usually only do so if the landlord has high income and low outgoings.

If you think this might be a viable option for you, get in touch and the whole-of-market advisors we work with will help you find the provider most likely to offer you a favourable deal, based on your circumstances and their BTL mortgage criteria.

What legal requirements are there?

Along with obtaining a buy to let mortgage, there are other legal requirements for UK landlords, and you’ll find a rundown of them below…

  • Gas safety:
    All UK landlords must arrange an annual inspection of the property’s gas supply gas appliances, carried out by a registered gas engineer.
  • Electrical safety:
    An electrical safety check must be commissioned before a new tenancy commences, and this must be conducted by a qualified electrician.
  • Energy performance certificates:
    Any UK property marketed for sale or rent in the UK must have an up-to-date energy performance certificate. Consult the Energy Saving Trust for further information.
  • Tenancy deposit schemes:
    Under UK legislation, all landlords must place tenant deposits in either a free custodial administered account or an insurance scheme and give the renter details of this within 14 days.
  • Landlord insurance:
    Some lenders might insist that you have landlord insurance on your buy to let property so you’re covered in the event of fire or flood damage. This will also protect your income stream which could dry up in the event of one of these catastrophes.
  • Furniture regulations:
    UK landlords must ensure that all furnishings comply with the latest fire regulations.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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