Understanding buy-to-let mortgages

There is no set score you have to have to get a mortgage, it changes from lender to lender. Some lenders are very strict, others relatively relaxed, and others have no credit score at all. My Finance Friend has over 25 years’ experience and will help find the right lender and right mortgage for you.

Many lenders out there don’t like lending for buy to lets to people who have never owned their own home but there are some who will so don’t rule this out if you are a first time buyer. As long as you have enough personal income to cover the mortgage amount we may be able to help you.

Every lender is different but generally the fees for a buy to let mortgage tend to be slightly higher than for normal mortgages. Some offer no fees with higher rates, some a fee with a better rate. It’s important to get this right and calculate the total cost. This all depends on the loan size and your specific criteria, along with your preferences for different types of rate.

These tend to work in the same way as normal mortgages – please see our Mortgage Friendly Guide – The different types of mortgage which will help you understand the different types of mortgages out there – or contact us to talk through what is right for you.

If you are an experienced landlord with a portfolio of properties, you may be looking for a lender that’s happy to secure one loan over more than one property. This again is something that can be done if you know what you’re doing. Many high street lenders only allow you to take a mortgage out on one house, and then may also require equity/deposit in excess of 40%. A more flexible buy to let lender or commercial buy to let lender may be the answer so it’s important to find a service that offers what you need.

Many lenders have restrictions on total exposure to the risks of the housing market and thus limit any borrower to a small number of properties and mortgages. Some lenders only allow a maximum of 3 buy to let mortgages in the background, however some have no limit. Those that favour large portfolios even offer better deals and more flexible criteria than would be available to a first time landlord.

Making sure any borrowing is affordable is of high importance for any lender because they’ll want their money back plus profit, without having to repossess! Again, each lender is different. Some will have a rule that any borrower must have personal income of at least £25,000 for example, where others don’t ask for any proof of personal income – only that the new mortgage payments are covered by the rent.

This is assessed either on personal income (e.g. 4 x salary), or on the ratio of expected rental income versus mortgage payment (e.g. rent must cover the mortgage payment by 125%). To get the biggest buy to let mortgage you can, you’ll need to find a lender that best fits your situation (and most likely an expert to help you with it as from here it gets complicated). Just get in touch to talk through your requirements; don’t worry – there’s no obligation and a chat to one of them will always be free!

The Loan To Value (LTV) limit for buy to let mortgages has been slowly increasing over the last couple of years since the credit crunch, but still we aren’t seeing the same level of lending we used to. Certain lenders are currently offering up to 80% of the value of the property as a first charge; however some more specialist lenders are offering second charges and loans over and above this. If you’re looking for borrowing of 85%-100% you’ll need to talk to an expert.

Anyone over the age of 18 can get a buy to let mortgage (subject to standard criteria). However certain lenders place restrictions on maximum age. For the most part, they need to ensure it’s affordable into retirement if there were no tenants in, but some lenders are less worried by this and have no strict age limit. Other lenders may require you to have an already pre-existing personal mortgage to begin with.