.png){kind=small}
.png){kind=small}
Buy to Let Mortgages
A buy to let mortgage is a type of mortgage that allows you to purchase a property with the intention of renting it out. Unlike residential mortgages, most buy to let mortgages in the UK are not regulated by the FCA as they are considered an investment product.
It is important to note that you cannot live in a property financed by a buy to let mortgage & must use it for letting purposes only. At your best interests we provide expert guidance on buy to let mortgages, helping you navigate the complex landscape of investment property finance and make informed decisions about your future. Let us help you unlock your potential as a property investor today.
How does the bank decide how much I can borrow?
When you apply for a buy to let mortgage, the lender will typically send a valuer to the property to assess how much rent they believe the property could generate. The rental income will be a key factor in determining how much you can borrow, as lenders will want to ensure that the rental income is sufficient to cover the mortgage repayments.
Each lender will have their own stress test that they carry out to assess how much you could borrow based on the rent. This stress test will typically take into account factors such as interest rates, void periods, and maintenance costs, and will determine how much the lender is willing to lend you based on the rental income.
It's worth noting that the maximum loan to value (LTV) with a buy to let mortgage is typically 85%, but in order to qualify for this maximum LTV, the rental income would need to be significantly high. In reality, most common LTVs for a buy to let mortgage are around 75%.
At Your Best Interests, our specialist advisors can help you find the right lender who can provide you with the maximum loan amount at the best possible rate. We have access to a wide range of lenders and can help you navigate the complex world of buy to let mortgages with confidence and ease.
In summary, the bank will typically determine how much you can borrow with a buy to let mortgage based on the rental income generated by the property. With our expert guidance and support, you can find the right lender and secure the best possible deal for your individual needs.
What is a stress test?
A stress test for a buy to let mortgage is a financial assessment carried out by a lender to determine whether you can afford their mortgage repayments, based on a range of potential scenarios.
During a stress test, the lender will typically analyse the rental income generated by the property, as well as your income, expenses, and debts, to determine if you would be able to make their mortgage payments even if there were changes in rental income, interest rates, or other financial circumstances.
For example, the lender may consider the impact of a potential void period (where the property is unoccupied and not generating rental income), or the impact of changes in interest rates on your ability to make repayments.
The purpose of a stress test for a buy to let mortgage is to ensure that you can afford the mortgage repayments, even in challenging circumstances. This protects both you and the lender from financial risks and helps ensure that you don’t take on more debt than you can handle.
Overall, a stress test is an important part of the application process for a buy to let mortgage, as it helps determine the maximum amount that a lender is willing to lend to you based on your ability to make repayments in different scenarios.
Who can I rent the property out to?
Most lenders would prefer you let out to standard tenants on normal AST's. However some specialist lenders do approve HMO (Houses of multiple occupation) tenancies as well, which includes letting out to students and DSS tenants.
What happens if I cannot repay?
The mortgage will be secured against your property, should you not be able to maintain payments the lender has the right to repossess your property.
How long can I have a mortgage?
The length of the mortgage can go up to 40 years and some buy to let lenders will lend past your 100th birthday.
What is the minimum deposit required?
The absolute minimum is 15% however the property will need to have a very high rental yield to pass for this amount. Traditionally it is best to have a 25% deposit for buy to let property transactions.