Can I get a buy to let mortgage on a new build property?
It is indeed possible to get a buy to let mortgage on a new build property, but your choice of lender will be fewer as many view these properties as higher risk.
New build buy to lets are attractive to some investors, as they can be more energy efficient and cheaper to maintain than older properties. Essential development work shouldn’t be needed in advance and the property is ready to generate rental income from the off.
Purchasing buy to let new builds can also be cost-effective if done off-plan, i.e. before the development is completed. Not only is there a chance the property will increase in value by the time it is finished, some developers offer discounts of up to 5% to early investors.
However, off-plan purchases can also come with increased risk since the buyer is investing in a vision, rather than a completed project - so it’s important to weigh up variables such as the possibility of the property decreasing in value and delays during development.
How are buy to let new build mortgages treated differently?
As we’ve already touched on, they may require a specialist lender and their eligibility criteria is typically more stringent than for older properties. For instance, new build buy to lets typically come with higher deposit requirement - around 35% is standard - due to the increased risk the mortgage provider is taking on. The minimum deposit you would normally need for a buy to let property which is not a new build is 15%.
Some new build lenders in the buy to let sector also prefer borrowers with landlord experience, as that will also decrease the perceived risk on their part.
If you’re in the market for a buy to let mortgage on a new build property, get in touch and the whole-of-market advisors we work with will connect you to the specialist lenders offering the best rates to somebody in your circumstances.
How is affordability for new build buy to lets calculated?
The lender will calculate this in much the same way as they would for older properties. Whether you can afford a BTL mortgage on a new build property will likely be based on the viability of the investment. In other words, whether the forecast rental coverage is high enough to cover the mortgage payments. Most lenders expect 125-140% rental coverage
In addition, some lenders might have minimum income requirements. It’s not unheard of for BTL mortgage providers to only deal with customer who earn at least £25,000 per year.
What else affects new build buy to let mortgage eligibility?
Aside from the higher deposit requirements, the eligibility criteria for new build buy to let mortgages is no different than for older properties, but given that new builds are a niche area of BTL lending, it’s vital to seek specialist advice if any of the below applies…
You have bad credit
You are retired
You are self-employed
The property you’re buying has non-standard construction
If you fall into two niche lending categories (i.e. new builds and any of the above) it’s important to consult with a broker who has access to the entire market to ensure you end up with the best rates. Make an enquiry to speak with one on the phone today.
*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.
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!
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