Buy-to-Let Mortgages

A buy-to-let mortgage is a type of home loan you’ll need if you’re buying a property to rent out rather than live in. Unlike a residential mortgage, it’s seen as a business investment. This means lenders will need to be satisfied that the rental income you’ll earn from the property covers the mortgage repayments rather than your personal income. 

This depends mainly on how much rent the property will bring in. For buy-to-let, mortgage lenders will want a clear buffer between the rental income and the mortgage payments, typically ranging from 125% to 145%. 

This buffer helps provide additional protection if interest rates rise and/or during periods when the rental property is vacant. Most mortgage lenders will also require that you earn a minimum salary from your day-to-day employment (typically at least £25,000 per annum) in case you need to cover the costs when there’s no rental income coming in.

Due to the higher risks associated with rental properties, lenders tend to require a larger deposit than for residential mortgages. The standard minimum deposit for a buy-to-let mortgage is between 20% and 25%. Higher deposits will help secure the most competitive interest rates. 

Most lenders will expect you to:

• Be at least 21 years old (some accept 18+). 

• Already own your own home.

• Have some previous landlord experience (or prove that you have a solid strategy if this is your first time)

• Earn at least £25,000 per year from your day-to-day employment.

• Have a good financial credit record. 

• Show that the rent will cover the mortgage comfortably (a rental income forecast can be provided by an ARLA-registered agent). 
  

Yes, it’s possible, but it really depends on the circumstances. In the first instance, you’ll need to speak with your current mortgage lender. There are usually two options available: 

• Get consent to let (a short-term agreement to rent it out), or

• Remortgage to a standard buy-to-let mortgage if you’re going long-term

Doing it without permission could break your mortgage agreement, so always check first.