HomeBuy to LetBuy to let mortgage criteria

Buy to let mortgage criteria

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HomeBuy to LetBuy to let mortgage criteria

Buy to let mortgage criteria

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Last reviewed on 19th July 2022

With interest rates still fairly low, property investment is as popular as ever. As lenders try to manage the increased demand for property investment, buy to let mortgage criteria is ever-changing.

Buy to let mortgages are easier to obtain than in former years. Previously, buy to let applications were primarily based on an applicant’s income and credit file. This meant that buy to let mortgages were only available to landlords with clean credit and a substantial income.

More recently, lenders have shifted their focus towards the rental income that investment properties may achieve. The change in focus means it’s easier to get a buy to let mortgage now than it previously was.

Buy to let mortgage eligibility criteria

Finding the right mortgage can be confusing as each lender has different buy to let mortgage criteria. For instance, some lenders may accept company applications from landlords that have their portfolio in a limited company, other lenders won’t. Lenders may accept bad credit, whereas other lenders will simply decline.

In some cases, you may only be approved for a buy to let mortgage via a specialist mortgage advisor. Criteria around buy to let has many variables. A structured approach is always advised to find the best buy to let deal possible.

Assessment criteria

Buy to let lenders will use criteria to assess your mortgage, such as:

  • Income and affordability
  • Deposit amount
  • Employment status
  • Age
  • Credit score
  • Location

Most buy to let lenders require applicants to be permanent UK residents or hold UK passports.

What is the affordability criteria for a buy to let mortgage?

Affordability is usually assessed by calculating your income against your outgoings. For buy to let mortgages, affordability is assessed differently. Lenders are more concerned about whether or not your rental income will be enough to cover your mortgage. That being said, there are lenders that require a minimum income of £25,000, but not all require applicants to have an income.

Lenders typically require rental income to cover a mortgage by 125-145%. Bear in mind, that not all lenders are the same and have different criteria for assessing how much they can lend on a buy to let mortgage.

Use our buy to let mortgage calculator here.

Buy to let deposit criteria

Lenders require larger deposits for buy to let mortgages in comparison to residential mortgages. You’ll more than likely need a 25% deposit for a buy to let mortgage. This is because the majority of buy to let deals start at 75% loan to value (LTV). Some lenders may consider 20% deposits, but such products are normally for experienced landlords.

If you have credit or affordability issues then lenders may require higher deposits to lower their lending risk. Furthermore, if the property you’re purchasing requires extensive work or is of non-standard construction, it’s likely you’ll need a higher deposit.

The status of your credit score

Getting a buy to let mortgage with bad credit can be difficult. The good news is that it’s still possible. In most cases, you’ll likely need a specialist lender to secure a buy to let mortgage. As each credit file varies, it mainly depends on the severity of the credit issues and how recent they were.

It’s often easier to get a residential mortgage than a buy to let mortgage if you have adverse credit. The same lender may offer you a residential mortgage but not a buy to let mortgage. You would then simply switch to a lender that suits your situation.

What is the age criteria for a buy to let mortgage?

The minimum age for being able to purchase a buy to let is 18. Although possible at 18, most lenders will require applicants to be at least 21 or even 25 in some cases.

The maximum age for being able to purchase a buy to let is generally 85. Some lenders will only go up to 75 years of age. There are lenders that have no maximum age limits in some circumstances.

ask a mortgage broker

What is the mortgage criteria for professional landlords?

Your level of experience has an effect on the mortgages that are on offer to you. Experienced landlords often find it easier to obtain buy to let mortgages as opposed to first-time landlords. Some lenders will require you to already be a homeowner, whereas others won’t.

Being an experienced landlord can also have its setbacks. This is because some lenders have a limit on how many buy to let mortgages they can offer an individual.

Landlord experience

The property experience you have will usually fall into one of the below categories. Each category can have an effect on your buy to let mortgage assessment.

  • First-time buyer
  • First-time landlord (own a residential property)
  • Landlord (currently owns at least one buy to let property)
  • Experienced landlord (owns a portfolio)

Property type

Most lenders only lend on traditional brick-built houses such as detached, semi-detached and terraced properties. Lenders instruct surveyors to carry out mortgage surveys to ensure that the property meets their requirements before lending.

On occasion, a mortgage survey can suggest a number of improvements as a condition of the mortgage. This is then usually agreed upon between the vendor and the buyer. Even if you remortgage a buy to let property, lenders may still carry out a mortgage survey to assess whether the property meets their specific requirements.

Why do mortgage lenders decline particular property types?

Lenders may decline properties that are in need of extensive refurbishment. For instance, most lenders would decline you if your property didn’t have an actively working kitchen. There are other methods for obtaining finance, but a buy to let mortgage will probably be out of the question.

The material that has been used to build the property can also have a huge impact on whether or not a mortgage is possible. For instance, properties that aren’t brick-built can be difficult to get a mortgage. These include barn conversions and properties made from other materials such as wood and concrete.

If you’ve seen a property and are unsure, our advisors can check to see if you meet a lender’s criteria.

Property location

The majority of lenders will lend in all UK locations, but there are lenders that are restricted to either England, Ireland, Wales or Scotland. If you’re particularly keen on a mortgage, make sure that the lender isn’t restricted in your area.

Can I use a buy to let mortgage for an HMO?

Buy to let mortgages are typically used for regular single lets with assured shorthold tenancy (AST) agreements. If you’re aiming to buy an HMO (multi-letting rooms/flats), then you may require a specialist lender.

Rates are typically higher for anything that isn’t a standard single let. If you’re still unsure, you can speak to an advisor who can help you further.

Learn more: What is an HMO mortgage?

Do my tenants need to be working to get a buy to let mortgage?

The status of your tenants can also have an impact on your buy to let mortgage. Some lenders won’t have an issue if your property was let to working professionals but may refuse if tenants are students or claim universal credit.

Read more: How to get a buy to let mortgage on a student property

Purchasing a buy to let with a limited company

Property investors with portfolios may benefit from paying less tax by placing their portfolios under a limited company. Applying for a buy to let mortgage with a limited company may allow you to offset expenses where you’d otherwise struggle. Some directors may just have a limited company that isn’t used for property investment but may want to purchase through the limited company.

If you’re a director and require a buy to let mortgage, it is possible. Lenders have been approving more limited companies for buy to let mortgages. This is because so many landlords have created limited companies due to tax changes.

Prior to this, there were only a handful of lenders that would have considered lending to a limited company as the risk for a lender is quite high. Self-employed buy to let mortgages are very common and lenders have adjusted their criteria accordingly. If you require a buy to let mortgage with a limited company, our advisors can help you to get started.

Can I get a buy to let mortgage if I live overseas?

The majority of lenders require buy to let applicants to be UK residents. As a result, expats can find it difficult to get a buy to let mortgage. Lenders often see expats as high risk due to the fact that the applicant is living in a different country. Occasionally, some lenders may still lend to overseas applicants in cases where applicants are low-risk.

Read more: How to get a buy to let mortgage as an expat.

Get help from a buy to let expert

Property investment typically starts with keeping a close eye on the numbers. Getting a good start to your investment journey is crucial, as you won’t want to overpay on your mortgage. Trying to compare hundreds of deals across multiple lenders can be difficult. This is why seasoned landlords often use mortgage experts to do this for them.

Our experts are experienced advisors and help landlords to find buy to let mortgages on a daily basis. We’ll assess your eligibility for a buy to let mortgage to let you know what your options are. Our experts can then search the market depending on your circumstances. You can make an enquiry to get started and an expert will call you back.

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About the author

Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.