Proving Income for Buy to Let Mortgages

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Home Buy To Let Mortgages Proving Income For Buy To Let Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: November 17, 2023

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

November 17, 2023

Owning a property and renting it out is considered a good investment for some, with the potential to have your mortgage covered and a little extra to spare. Unless you can buy a property outright, to do this you’d need to apply for a buy-to-let mortgage. But how much would you need to earn to qualify for such a loan and does it matter where that income is coming from?

By reading this guide you’ll have a better idea of whether your income matches up to lenders’ requirements as well as the other factors lenders consider as part of buy-to-let applications.

What are the income requirements for a buy-to-let mortgage?

Some lenders require a buy-to-let mortgage applicant to have a personal income over £25,000 per annum. Typically, that money would come from your salary but it’s not the only avenue.

If you have less than £25,000 coming in, don’t eliminate the idea of a buy-to-let mortgage because this isn’t the most important factor for lenders (and in fact some lenders don’t have a minimum specification in place.) Your affordability assessment will largely depend on the rental income you’ll be able to get instead.

If you want to apply for a buy-to-let mortgage without a job, some lenders will accept:

Rental income

Most lenders require a rental income between 125% and 145% of the mortgage repayments. Where you’ll fall within that bracket is usually based on whether you are a basic or higher rate taxpayer.

Example: If your mortgage repayment is £800 a month, you would need to charge £800 in rent plus an additional 25% or 45% of that.

£800+25%= £1,000

£800+45%= £1,160

Calculate your repayments

You can get an idea of whether your mortgage payments will be affordable based on your property’s rental potential by using our calculator below.

Buy-to-Let Mortgage Calculator

Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.

Enter the value of the rental property here
£
A deposit of at least 20% is usually required for a buy-to-let mortgage
£
Most lenders will require a deposit of at least 20%
Deposit must be less than the property value
Enter the anticipated monthly rent here
£
Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
%
Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
years
Borrowing

Loan to Value ratio (LTV):

Most lenders won't offer buy-to-let mortgages over a LTV of 80%.

Interest Cover Ratio (ICR):

Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.

Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.

Although the above calculator is a good starting point, a buy-to-let mortgage broker can look at your whole financial situation and assess whether, with all factors considered, the estimations provided are an accurate depiction of what you might be offered by a lender.

Sidenote: Buy-to-let mortgages often come with an interest 1% higher than on conventional mortgages. 

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Other factors lenders consider:

Besides rental income and personal income, lenders will also be considering:

  • The value of the property: Some lenders require a buy-to-let property be valued at more than £40,000.
  • The type of property: If a property is of non-standard construction it may eliminate certain lenders.
  • Demand for the property type: Some properties are more desirable than others and may affect your ability to rent out the property.
  • Your age: The minimum age for a mortgage is 18 but some lenders prefer borrowers be 21 or even 25. Certain lenders also have maximum age limits of 75 or even 85.
  • Your credit history and debt: If you have serious debt or bad credit, it’s best to talk your options through with a buy-to-let mortgage broker as they’ll be able to give advice on which specialist lenders to apply to.

Other factors that affect income requirements

If you’re applying for a buy-to-let mortgage as a person who is self-employed, a professional landlord or wants to use a pension in place of an income, there are some caveats.

Self-employed

While you don’t need to be earning any more or less than an employee, as part of your application you will need to share evidence of your personal income such as company accounts, potentially dating as far back as three years, tax assessments or bank statements.

Whether you’re a professional landlord

If you’re a portfolio landlord, in order to take out another buy-to-let mortgage, you’ll need to present either the other properties’ accounts or a self-assessment tax return.

Some lenders, such as Leeds Building Society, will however refuse an application if you have a buy-to-let mortgage on more than four other properties.

Other lenders state that 10 buy-to-let properties is the maximum you can have.

If you’re declaring pension income

If you are over 55, you could opt to withdraw a portion or the totality of your pension and purchase a buy-to-let property. However, it’s worth noting that only 25% of the pension is tax free.

You might find that while some lenders don’t like to offer residential mortgages to those of retirement age, more are open when it comes to a buy-to-let mortgage. That’s because it is viewed as an investment and a loan less dependent on a personal income or a person’s age.

It’s best to seek expert help if you think you’d like to apply for a buy-to-let mortgage this way.

How a broker can help make your income go further

The process of applying for a buy-to-let mortgage comes with its own set of complexities to navigate and depending on the income you have and the form it takes, certain lenders may instantly reject an application. This is where a broker specialising in buy-to-let properties comes in. They can…

  • Assess your income amount and type and share which lenders are likely to accept your application.
  • Consult on how much rental income – either 125% or 145% – you’ll need to generate and what that amount likely looks like for the property in question.
  • Assist in compiling the application complete with all the additional paperwork that could be required depending on your circumstances.

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Happy approved couple

Can you get a buy-to-let mortgage with no income or job?

Yes, but the number of lenders you can apply to will be smaller. You’ll also have to meet the aspects of a lender’s criteria and show that you can feasibly afford the monthly repayments, even without the rental income. Perhaps you have savings from an inheritance or redundancy package you can use. Owning an additional property can also help in this regard.

Getting a buy-to-let mortgage whilst claiming benefits

Again, the pool of lenders willing to offer you a buy-to-let mortgage in this instance will be smaller but obtaining a buy-to-let mortgage is still possible. For most lenders, it will depend on the type of benefits you’re receiving.

They want to know you’ll be able to reliably meet repayments. With that in mind, they might be more likely to approve an application based on longer-term benefits such as disability benefits or carers allowance rather than say maternity pay that might be viewed as more short-term.

See our guide to getting a mortgage on benefits for more information.

How to prove your income

In any buy-to-let application, lenders need to see proof of income. That typically includes:

  • Pay slips (usually three months’ worth);
  • An employment contract; or
  • SA302 tax returns if self-employed.

Additional documents you may need to supply to support your application include:

  • Evidence of rental income if you own other properties
  • Evidence of an ample deposit – ideally around 25%
  • Details of any bonuses or commissions you may receive
  • Proof of current address
  • Your most recent P60

Get matched with a buy-to-let mortgage broker

You may well have made calculations and think your personal income and potential rental income will make the cut when it comes to applying for a buy-to-let mortgage but it’s not worth the risk of going into the application process without double checking.

Assuming a lender will be open to your income amount, type and the rental income you think you’ll be able to get could lead to a rejection. Consulting a broker who understands the buy-to-let market and submits such applications every day will ensure you’re applying to the best lender for you and with an application that’s more likely to see you swiftly become a landlord.

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FAQs

It depends on your mortgage provider. While it’s not ideal, some lenders are open to borrowers covering any potential gaps in rental income via their own personal income. This is what’s called buy-to-let top-slicing and isn’t usually viewed as a long-term solution.

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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 Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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