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Buy to Let Mortgage Quotes and Securing an AIP

How to get a BTL mortgage quote or approval in Principle

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 22nd August 2019 *

A lot of the queries we receive are from buy to let (BTL) investors, keen to take out a mortgage on a property they wish to rent out to others. 

Nowadays, many people opt to fill in application forms and request buy to let mortgage quotes online. However, online forms and rates tables don’t always tell you which lenders you qualify for and may not take into consideration certain individual circumstances that could majorly impact your eligibility.

These days, many online BTL brokers or lenders require you to obtain an Agreement in Principle (AIP) as the first step of the application process, which can give you a better indication as to how much you will be able to borrow and at what rates.

This article is going to discuss AIPs in relation to BTL properties, and will cover:

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How do I get a buy to let mortgage quote?

The rates you will be offered on a buy to let mortgage and the amount you could potentially borrow will vary based on a number of factors, such as how closely you meet the lender’s eligibility criteria and the projected rental income. Given that the market is vast, the best way to get a quote is to use whole-of-market broker. They can compare the entire market for you in search of the best deals, potentially saving you time, money and marks on your credit file.

Can I apply for a buy to let mortgage online?

Yes, absolutely! You can get the ball rolling on your application by making an enquiry. What’s more, many of the brokers we work with would be happy to carry out the bulk of your application online, if that’s your preferred channel.

What is a buy-to-let mortgage agreement in principle and do I need one?

A Buy to Let (BTL) agreement in principle (also referred to as a buy to let mortgage in principle, or decision in principle), is a certificate or statement from a lender to say that “in principle” they would consider lending a certain amount to a prospective borrower based on some basic information you’ve supplied. 

In order to obtain one, you are usually required to fill out an AIP buy to let mortgage application form online, and your AIP application will normally be processed within 24 hours, and usually lasts between 60-90 days (varying by lender).

As mentioned above, in many cases an AIP will be carried out by a mortgage broker or provider prior to any application being made. 

The details you supply will allow them to check the information you’ve provided by looking over your credit file, thus helping them establish whether they will consider lending the requested amount to you.

While an AIP is not an essential requirement, they can be useful in terms of reassurance and credibility as you undertake the buy to let mortgage process. But the most important thing to note is that an AIP is not a mortgage offer. 

What are the pros of an AIP?

  • Having an agreement in principle to demonstrate that you can, theoretically, afford to buy a property, which could make you appear a more attractive buyer.

  • Not everyone obtains an AIP, so having one could give you more credibility and help you stand apart from other prospective buyers.

  • If you are worried that your credit history, for example, won’t be strong enough to meet a lender’s requirements, an AIP may give you some added reassurance.

  • As part of obtaining an agreement in principle, the lender or advisor will run a consensual credit check. This is where most of the concerns lie for borrowers contemplating carrying out an online AIP check. 

However, the good news is that some lenders will only use a “soft check”, which  doesn’t leave any footprint and therefore will not impact your credit score.

What are the cons of an AIP?

  • They can give you false hope. As mentioned, an AIP is not a guarantee, so as you continue the application process and a provider assesses your circumstances in more detail, they may change their mind about lending to you.

  • As mentioned above, while a handful of lenders carry out a “soft credit check”, many take a “hard credit check” approach, which will leave a footprint on your credit record. This could be detrimental to your credit score and may negatively impact your chance of getting a mortgage, especially if several searches are carried out within a short space of time. Ensure to check with your chosen lender which approach they take before consenting.

  • While you may secure a mortgage in principle from a particular lender at a certain point in time, the rates could have changed by the time you get around to actually taking out the mortgage. Similarly, you could find yourself in a situation where a different lender is offering a better deal.

What is the AIP application process for a buy to let mortgage?

So, how do you go about applying for a buy to let mortgage agreement in principle? Many opt to fill out an AIP application online, but many lenders are happy for you to carry it out over the phone, or in-branch of your selected bank. It is an essentially a form in which the lender will ask you questions, gather some initial information, and review your credit history. 

Most AIP applications will take no longer than 15 minutes (often less), and tend to be free - although many advisors do charge for this. If this is an issue, make sure you double-check before committing.

How do we manage your BTL application process?

If you approach us for an AIP and your mortgage application is successful, this is how the process will go (in an ideal world!)

  1. Prospective BTL investor gets in touch 
  2. We assess your situation and refer you to the best advisor to suit your needs
  3. Your expert  gives you a call to complete a fact-find 
  4. Your expert searches the market for the best deals and provides a recommendation
  5. You accept the Recommendation 
  6. Your expert submits a formal AIP
  7. Your expert submits a full application, 
  8. Your expert instructs the lender Valuation on the property 
  9. The lender underwrites the application along with the valuation report
  10. The mortgage is formally Offered
  11. Exchange of contracts
  12. Completion

What’s more, the brokers we work with are very flexible to your needs - if you are only free to speak in the evenings or you’d prefer to carry out most of the process online, they  can accommodate this 

Contact us, and we’ll refer you to the best expert for you

What documents do I need for a buy to let mortgage AIP?

So, when applying for an AIP, what documents are needed for a buy to let mortgage? 

Your advisor or lender will require some personal details, plus some information on your income and expenditure. In the early stages, you may not need supporting documents such as proof of income, but it’s good to be prepared just in case. 

It’s also unlikely that they will delve deeply into details surrounding your expenditure as they would with a full mortgage application, but again it could be useful to have some key information at hand.

As a general guide, we suggest bringing with you:

  • Identification (passport / driving license / national ID card)
  • Proof of address (council tax bill / bank statement)
  • Proof of income (payslips / accounts)
  • Proof of outgoings (bank statements)
  • Portfolio details (for experienced landlords)

What factors impact eligibility for a BTL mortgage quote?

The quote you ultimately receive will be impacted by the following factors...

Affordability

The buy to let process can be difficult, and providers can be wary about lending for a second home due to the risk involved. Often, they will require you to have a higher deposit together, usually 25%, but some lenders may accept less, as well as projected rental income for the property. 

Typically, rent needs to be able to cover 125% of the mortgage interest, or more for higher rate taxpayers. Some will require even greater sums for higher risk cases such as HMOs and student lets.

There are also various other individual circumstances that may impact your eligibility:

First-time buyer or first time BTL buyer

While a handful of lenders may consider you for a BTL if you’re a first-time buyer or first time BTL investor, you are likely to be limited in your choice of lenders, especially if this is your first ever mortgage application. 

A large percentage of providers will want you to own your own residential property (usually for a minimum of six months), before they are willing to lend to you. 

Other providers will just need you to own a property, so for example, if you live in rented accommodation but have another BTL property this may not be a problem. 

If you’re a complete first-time buyer and don’t own any property at all then your mortgage options will be more limited, but not impossible. Lenders are fewer, and usually require you to have enough personal income to cover the mortgage (as well as the rental yield being sufficient), which is different than for homeowners, where affordability is mostly based on the rental income alone.

If this is the case, we advise speaking to a specialist who will point you in the direction of the lenders most likely to consider you. 

Employment status

If you are self-employed you are typically seen as higher risk than those in “conventional” full-time employment. 

Contractors and the self-employed will normally be asked to provide a year’s worth of accounts before lenders will consider them for a residential mortgage, so for a riskier buy-to-let (BTL) loan it’s likely you will require a couple of additional years’ worth of books to be considered. 

The good news is that the higher your deposit, the greater number of providers you should have access to.

Adverse credit issues

As with all mortgage applications, poor credit history is a warning sign to lenders. This is even more prevalent for BTLs, because if you fall into financial difficulty and you own your own home as well as a BTL, you’re likely to prioritise keeping up repayments on your main place of residence. 

Ultimately though, it comes down to how recent and how severe the bad credit issues are, as well as the reason for them.

Non-standard property types

Any property that doesn’t fall within the standard property type definition of a “house built from brick and/or block walls with slate roof”, is classed as a non-standard construction. Such properties are generally seen as riskier investments for lenders, which typically means less competitive rates, and you may be required to have a higher deposit together than for your usual BTL. 

However, every lender will have their own requirements, and circumstances will vary vastly from property to property, so approach a whole-of-market broker, such as those that we work with, for access to a full range of lenders and the most competitive rates.

Purchase Type: BTLs in personal name Vs. limited company

Contrary to popular belief, there is quite a bit of choice for those looking to invest in a buy to let (BTL) through a limited company. While the best rates may not be available to LTDs, there are still lenders that offer competitive deals. 

If applying via a limited company, some lenders want you to see proof of income and will have minimum requirements. 

Different lenders will accept different income amounts and sources, so all circumstances can generally be accommodated. If it is a new limited company, you won’t have any trading history or income so lenders will base their decision on your own income.

Is borrowing criteria stricter for LTD companies?

Typically, no, but providers will probably want to know:

  • How many properties you already own (if applicable), both personal and in a LTD company structure
  • How many shareholders the company has.
  • The number of directors on your application. Usually lenders have a maximum number they will allow.

Speak to an expert to get your buy to let AIP today

If you have any questions or you want more information on securing a buy to let mortgage quote or buy to let AIP, call Online Mortgage Advisor on 0808 189 2301 or make an enquiry

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating

Updated: 22nd August 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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 info 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.

Find out more about buy to let mortgages

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