Using Rental Income to Qualify for a Mortgage

Get expert advice from a broker to see whether you qualify for a residential mortgage based on rental income as a landlord

Firstly, how long have you been receiving rental income for?

Home Income Types Using Rental Income To Qualify For A Mortgage
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Updated: March 15, 2024

In this article, we explain how to get a mortgage using rental income as your main source of earnings, what evidence lenders will require and how a specialist advisor can help you through the application process.

Can you use rental income to qualify for a residential mortgage?

Yes, if you’re a professional landlord, most lenders do accept the income you receive from your rental portfolio as the primary source when looking at your eligibility.

As with all mortgages, lenders are occupied predominantly with how you stand with your affordability status, meaning how well you might be able to make the repayments in a stable and risk-free manner.

Lenders recognise some people will not have another source of income like a regular salary if they live off the means of their properties, or if they do it might be irregular or a low income, and therefore not reflective of their overall economic worth and ability to pay back their debt. By allowing rental income to be taken into consideration for a person’s own residential mortgage, they are acknowledging that there are situations which are not one-size-fits-all when it comes to borrowing.

Despite mitigating circumstances being on the table for landlords, lenders will be more scrupulous and vigilant, expecting solid evidence of your income and accounts.

Maximise your chance of approval with a specialist who can help with using rental income for mortgages

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How does it work?

There are a number of different allowances and rules around proving your affordability and borrowing this way, and each lender comes with its own set of parameters. This is where it can get complex, so getting a specialist broker on your side, like the ones we work with, to help you understand the intricacies of the application process is advisable.

The portion of your mortgage that can be based upon your rental income will depend on a number of factors, including:

  • How long you have been a landlord for
  • How many properties you own
  • Your ability to provide evidence via tax calculations

For example, Loughborough Building Society can accept 50% of your buy-to-let income if you have two or fewer properties, or 100% if you have three or more. Hinckley and Rugby Building Society can offer an 80% loan-to-value ratio mortgage if you have documentation that shows the latest two years of tax calculations, but will stretch to 100% if you have three or more years under your belt.

Some lenders will only accept this kind of borrowing via a self-employed policy or income (Accord and Barclays). Others will look at your two-year average profits and make a decision on 75% of these ‘to allow for fluctuations’ (Buckinghamshire Building Society), while other lenders stipulate that they can only base rental income that’s been derived from properties in a limited company name.

How much can you borrow?

This is dependent on many different factors and benchmarks set out by individual lenders. However, you can get a better idea of where you might stand initially by using our affordability calculator. While it cannot replace in-person advice or take into account the many nuances of rental income and affordability, it can help you to get the ball rolling.

Most mortgage lenders initially use a multiple of your annual income before deciding how much you can borrow. All you need to do is input the annual rent you receive (or use the percentages outlined in the previous sections) to get an idea of how much you can borrow.

Mortgage Affordability Calculator

Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.

Input full salaries for all applicants
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Your Results:

You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

Get Started with an expert broker to find out exactly how much you could borrow.

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What kind of evidence is required

The typical bank statements and payslips will not be adequate for this kind of affordability verification.

To prove your declared profits, you will need to get your hands on the past two or three years’ worth of:

  • SA302s (self-assessment tax returns)

And/or any of the following:

  • Tax year overviews
  • An accountant’s reference/certificate
  • Details of rental contract being used
  • HMRC tax assessments
  • Full details of property portfolio
  • Any evidence of tax liability outstanding

How to get a mortgage using rental income

The process might seem overwhelming at first, but by taking these initial simple steps, you can be on your way to submitting your application:

  • Download your credit reports: By clarifying your prospects from the start, you can get a clearer picture of where you stand and of any challenges that might lie ahead, as well as what you might be able to afford. Find out how to check your credit score here.
  • Find a specialist broker: An advisor with experience of evidencing affordability via rental income will help your plight enormously. Not only will they help you to understand what to expect, they can navigate the marketplace on your behalf and strengthen your application. Get in touch and we’ll arrange for a broker we work with, who has appropriate experience in this field, to contact you straight away.
  • Collect all necessary evidence: The documentation with this kind of borrowing is vital and lenders will have clear stipulations around what they need to see before granting any loans. Work with your broker and collect everything together.

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Which lenders will accept rental income?

The likes of HSBC, Nationwide, Barclays and NatWest, to smaller lenders such The Mortgage Lender, Vernon Building Society, Livemore Capital and Digital Mortgages by Atom Bank will all consider mortgage applications where rental income has been included as part of the affordability assessment.

In most cases the documentary evidence needed can be provided by SA302 tax overview statements and recent bank statements showing the rental income deposits.

Speak to a broker experienced in cases involving rental income

Understanding such a niche part of the mortgage landscape and grasping exactly what lenders expect can be confusing and stressful. Using a specialist and experienced broker who has a background in securing mortgages based on rental income will take the pressure off and increase your chances of success.

The impartial and fully-trained advisors in our network work hard for clients and are a huge support to anyone without a clear-cut mortgage application. They know where the amendable lenders are and where to find the best deals. To get matched to the right person for you, take us up on our free initial consultation on 0808 189 2301 or make an online enquiry.

Maximise your chance of approval with a specialist who can help with using rental income for mortgages

Get Started Phone Icon 0808 189 2301

FAQs

This is a possibility and some lenders might be willing to grant this, however the buy-to-let property must be owned under the same company name as the commercial mortgage will be under. Alternatively, it must be part of the property portfolio owned by the company. Read more about commercial property mortgages.

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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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