Buy to Let Mortgage Criteria
Buy to let mortgages are assessed differently according to which lender is looking at the proposition. We have outlined below some of the basic principles that are used so that you can get an idea as to whether you may be eligible for a buy to let mortgage- if you have any questions just call us to discuss your personal situation.
Availability:
- Buy to let mortgages are available to people from the age of 18, though some lenders have a minimum age of 21 and others start their buy to let range for applicants of 25 and over.
- Most lenders offer mortgages to UK citizens but deals are available for those working and living in the UK on a Visa (if you fall into this category speak to one of our advisers as to the deals that may be available to you).
- Ex-Patriots can take mortgages on buy to let properties in the UK though not all lenders will operate in this market- for more information on ex-patriot buy to let mortgages speak to one of our buy-to-let team.
- Most lenders will base a buy to let mortgage on the achievable rent of the property (see below for examples of how this is calculated). In some cases lenders will also need to see evidence of your personal income to assess your application and will only lend based on a minimum personal income. At Fee-Saver Mortgages we have access to the whole market and will happily look into the most suitable deal for you based on your specific circumstances.
- Some lenders will lend on a buy to let mortgage based on your personal income (generally using your disposable income after existing mortgage and credit commitments are deducted). These deals can prove attractive for high net worth clients with significant disposable incomes or for those applicants who have a good salary and relatively low outgoings.
Buy-To Let Rental Calculations:
Lenders will use two figures when calculating how much they will lend based on a given rent. The first is the “stress rate” that the lender will apply and the second is the rate at which the calculation is applied (e.g. the pay rate or a nominal rate chosen by the lender). To demonstrate the huge difference between what lenders could potentially offer based on these calculations we have illustrated two examples below based on products that are currently available. A rent of L800 is used in these examples:
- Lender X calculates the available mortgage based on 100% rental coverage at the initial mortgage pay rate (currently 4.74%). Based on L800 rent this equates to a maximum mortgage of L202,531.
- Lender Y calculates the available mortgage based on 125% rental coverage at Bank of England base rate (currently 5.5%) + 0.5% which gives a working rate of 6%. Based on L800 rent this equates to a maximum mortgage of L128,000.
These examples illustrate the value of dealing with a buy to let broker that has whole of market access to ensure that you can access the widest possible range of deals.
Loan to Value or LTV (the amount of mortgage against the value of the property expressed as a percentage):
Buy to let mortgages are currently available up to a maximum of 90% LTV. When looking to borrow with low deposits you will be able to access more lenders if you have a mortgage history behind you and/or have held at least 1 existing buy to let mortgage for the last 12 months.
Borrowing tends to be more flexible at the lower LTV’s, which is reflected in the fact that many lenders will operate on a non-status basis in terms of income and rent below 75% borrowing. This means that assuming an applicant passes credit score the lender will not need to evidence either personal income or rental income.
For those landlords who have a number of properties Fee-Saver Mortgages can offer deals that will allow you to borrow based on the equity and rental coverage across the portfolio. This means that if you are not too highly geared and have surplus rental income across the portfolio you can move quickly on deals that may not “stack” based on conventional criteria. Talk to one of our buy to let specialists about your situation today
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