Here you’ll find everything you need to know about buy-to-let mortgages while comparing the best deals on the market. We have great advice and information about how buy-to-let mortgages work, what criteria lenders look for and how a mortgage broker in Dorset, like Ayla Mortgages, can help you through the process.
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Leveraging our expert knowledge and market-leading technology, you can compare the best buy-to-let mortgage rates and remortgage buy-to-let deals across the whole market.
What is a buy-to-let mortgage?
A buy-to-let mortgage is used to purchase a property that is to be rented out to tenants. These types of mortgages are usually interest-only mortgages, meaning you will only pay the interest off each month. The remaining mortgage loan, which is the original amount you borrowed, doesn’t reduce. You must then pay this back in full by the end of the mortgage term. This is usually done when you sell the property. Be aware that renting out a property with a residential mortgage rather than a buy-to-let mortgage breaches your mortgage agreement with the lender, which could result in the property being repossessed. If you want to start renting out a property with a residential mortgage, you must first get consent from your existing lender or speak to them about switching your residential mortgage to a buy-to-let mortgage.
Why should you use a buy-to-let mortgage broker?
Using a mortgage broker is the smart way to get the best deal possible on a buy-to-let mortgage. Buy-to-let mortgages can be more complex than standard residential mortgages, particularly if you’re a new landlord. However, when you use a local mortgage broker based in Ringwood like Ayla Mortgages, we can take all the stress out of finding the best buy-to-let mortgage for your needs. We can support you every step of the way and make sure you understand how they work. Some lenders also require you to use a buy-to-let mortgage broker and won’t accept applications directly from individuals.
Finding the right information about different property types or a lender’s affordability criteria isn’t always easy. Fortunately, with our extensive experience and knowledge of the market, we know what each lender is looking for. Once we know your circumstances and future needs, we can advise on the best product for your situation. As a specialist independent buy-to-let mortgage broker in Ringwood, we aren’t tied to one lender or product. We have access to the whole mortgage market, which we pass on to our customers. We do all the hard work for you, so you can rest assured that you’re getting the best deal possible.
Criteria For Buy-To-Let Mortgages
Mortgage lenders consider several factors before approving a buy-to-let mortgage application, including projected rental income, deposit, age and more.
Projected rental income
When your mortgage adviser begins gathering information for a mortgage, they will ask you to estimate your future rental income. You’ll need to base this on the monthly amount you expect to charge your tenants. Your lender will want this information to determine the monthly interest payments you can afford before they provide you with your Decision in Principle (DIP). Most lenders will want to see that your projected rental income is in the region of 125% to 145% of your interest payments. They may also want to carry out a “stress test” on your income, which assumes a 5% interest rate, to ensure you can cover any interest rate fluctuations or unexpected expenses. Lenders will also want to assess any additional income you have to determine whether you can cover any future repairs or periods when you don’t have tenants.
As the interest rates for a buy-to-let mortgage are higher, you’ll be required to put down a larger deposit than for a standard residential mortgage. This is usually 25% to take into account the risk the lender takes. Some lenders might consider a smaller deposit — check with one of our advisers to determine your options.
While most lenders have set age limits for a buy-to-let mortgage, some will approve applications from potential borrowers aged 18, while others don’t have an upper age limit.
Buy-to-let mortgages are available to first-time property buyers, first-time landlords or those with an extensive buy-to-let portfolio. While each lender has its own borrower requirements, fewer lenders may be willing to accept a mortgage application on a buy-to-let if you are a first-time buyer. Some lenders also won’t accept applications from those with large property portfolios.
Where you live
Most buy-to-let mortgage lenders require borrowers to be UK residents. However, some lenders will approve applications from ex-pats, but they may have stricter lending policies.
Getting approved for any type of mortgage can be difficult if you have a low credit score, especially if you’re applying for a mortgage at a competitive rate. While some lenders offer flexibility in terms of credit history, they usually want you to use a mortgage broker like Ayla Mortgages.
Landlords and private residential owners aren’t taxed the same. As a landlord, you’ll have to pay more Stamp Duty than if you were buying a private residential property. You’ll also have to pay Income Tax on your rental income and Capital Gains Tax if you sell your buy-to-let at a later date.
When your mortgage broker begins gathering information for a mortgage, they will ask you to estimate your future rental income. This amount is based on how much you expect to charge a tenant monthly. Your lender will want this information to determine what you’ll be able to afford in monthly interest payments before they provide you with your Decision in Principle (DIP). Most lenders want to see rental income in the region of 125% to 145% of the monthly interest payments. They may also want to carry out a “stress test” on your income, which assumes a 5% interest rate, to ensure you can cover any interest rate fluctuations or unexpected expenses. Lenders also want to look at your income to determine whether you can cover any future repairs or periods when you don’t have tenants.
How Ayla Mortgages Can Help You Find The Best Deal On A Buy-To-Let Mortgage
We look after everything
We make getting a buy-to-let mortgage as quick and simple as possible. With extensive experience in the mortgage market, you can trust us to take handle everything for you — from start to finish.
We come highly recommended
With many 5-star reviews on Google and reviews.co.uk, you can have peace of mind that you’re in safe hands.
Expert advice tailored to you
We know that there’s no one-size-fits-all when it comes to buy-to-let mortgages. We work with you to arrange the right mortgage for your needs.
Getting a buy-to-let mortgage
Here are the key steps needed to find the right buy-to-let mortgage for you:
Meet with your Ayla Mortgages adviser
We will discuss your requirements and ask questions to ensure we have everything we need. We’ll then review the market to find the right buy-to-let mortgage for your needs and talk you through our recommendation.
Receive your Decision in Principle (DIP)
We will then secure your DIP, which is the mortgage lender’s promise that they will loan you the money based on the information you’ve provided, pending a property valuation.
Make an offer on a property
When you have a DIP, you are better placed to put forward an offer on a property and can begin this part of the process.
Submit your mortgage application
Once the vendor has accepted your offer, your Ayla Mortgages adviser submits your mortgage application on your behalf, including your supporting documents, liaising with you and your lender.
The lender underwrites your application
Your lender will review the information you’ve provided in your application and request a valuation. This is called underwriting your mortgage application.
You receive your mortgage offer from the lender
If your mortgage lender is satisfied with everything, they’ll send you their mortgage offer. At this point, you are able to take the final steps for your property purchase.
The legal process begins once you’ve accepted the lender’s offer. You should also arrange building insurance for the new property to begin on exchange.
Exchange and completion
Your solicitor or conveyancer will exchange the purchase and sale contracts with the seller’s solicitor/conveyancer. Once the funds have been successfully transferred on the agreed date, the purchase is complete.
Buy to let FAQs
Here you’ll find comprehensive answers to some commonly asked mortgage questions. If you have a question that isn’t answered here, please contact us and we will be very happy to help you
Before approving a buy-to-let mortgage, a lender will check your application against their eligibility criteria and review your anticipated rental income. Each lender has their own criteria for buy-to-let mortgages. Still, you can expect them to have stricter lending requirements as a buy-to-let mortgage poses a greater lending risk than a standard residential mortgage. To learn more about your options for a buy-to-let mortgage, call us today on 023 8235 2287.
Buy-to-let mortgages pose a bigger risk to lenders than a standard residential mortgage, so the rates for these types of mortgages are higher. Lenders know that when a borrower has taken out mortgages on their home and a rental property but can only afford to pay one, they’ll likely prioritise their home’s monthly mortgage payment rather than that of their rental. To offset this risk, lenders will typically set higher interest rates on buy-to-let mortgages. It’s also common for them to require a larger minimum deposit, typically a minimum of 20%.
Lenders have different rules concerning the number of buy-to-let mortgages you can have. Some lenders will also set limits based on your rental property portfolio, such as if you have any properties mortgaged with a different lender. High-street mortgage lenders set a limit of between three and five. But some lenders will work with landlords who have four or more properties in their portfolio.
The size of buy-to-let mortgage you can get approved for and at what rate will typically depend on your anticipated rental income and the size of your deposit. The lender will consider these factors when determining the amount of monthly interest payments you can afford.
Yes, it is possible to switch a residential mortgage to a buy-to-let by asking your lender to give you consent to let on your residential property if you are planning to rent it out for a set time, such as one year. If you are looking to rent out your home for the foreseeable future and also release equity to invest in a new property, you’ll need to speak to your mortgage broker in Dorset about your let-to-buy options.
Yes, you can get a buy-to-let mortgage if you’re a first-time buyer. However, only a few lenders offer these types of mortgages, so it’s a good idea to speak with a specialist indpendent mortgage broker in Poole or Bournemouth who can discuss your options.
Most lenders will typically offer loan-to-value (LTV) buy-to-let mortgages of up to a maximum of 75%. However, some specialist mortgage lenders will offer LTVs of up to a maximum of 80%. These specialist mortgages are often more expensive, so if you are interested in one, speak to an independent mortgage broker to find out your options and the right buy-to-let mortgage deal for you.
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