October 5, 2020
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If you’re new to the world of buy to let mortgages, you might wonder who’s eligible for them. This page explains the kinds of things a lender will look at to decide if you’re eligible or not.
Most lenders will expect you to have an annual income of at least £25,000 if you’re applying for a buy to let mortgage. They’ll also want proof of your income in the form of recent payslips and a p60.
However, some lenders will judge it more on the rental income and have no minim salary requirements
Lenders see buy to let mortgages as a bigger risk than standard mortgages, and so they ask for a bigger deposit. Typically, you’ll need to put down at least 25% of the property’s value (e.g. £50,000 on a property worth £200,000).
The more you chip in, the less you’ll have to borrow – which means a lower Loan to Value (LTV) ratio, lower interest rates and lower monthly repayments.
When you apply for a buy to let mortgage, you’ll be asked how much you rent you expect to collect from your tenants each month. They’ll want to see enough to cover 125% of your monthly mortgage repayments.
For example, if your monthly mortgage repayments were £500, they’d expect a monthly rental income of at least £625.
It’s important to note that buy to let mortgages tend to be interest-only, which means your monthly repayments only cover the interest on the mortgage loan, and not the loan itself.
So, while you need to collect 125% of the repayments in rent, those repayments are likely to be lower than they would be on a mortgage where you pay off both the loan and interest each month.
It is possible to get a buy to let mortgage where you pay off the loan and interest each month, but they’re less common.
The typical buy to let mortgage term is 25 years. Lenders are generally more likely to accept your application if you’re younger than 45, but there are some lenders who accept buy to let investors in their 70s or 80s too.
Eligibility criteria for a buy to let mortgage varies from one lender to the next – that’s why it’s wise to use a broker who understands what each lender will and won’t accept.
Our in-house mortgage advisers can help, and their advice is completely free. To get started, please use our Mortgage Matcher. It takes 15 minutes and shows you what buy to let mortgages you’re eligible for.
After that, you can book a telephone appointment with an adviser to chat through your options.
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