Buy-to-let made simple
Find the perfect buy-to-let mortgage for your investment goals.
Finding the right buy-to-let mortgage is the key to the profitability of your property investment, especially if you have a growing business and need a lender that will support larger property portfolios.
Discover a simple way to apply for a buy-to-let mortgage with us because:
- We cut through the jargon, helping you understand which lenders and conditions will work best for your investment goals.
- We work with a range of specialist lenders willing to give you the best options if you are a first-time buy-to-let buyer or have a large portfolio.
- We are experts in our field and focused on supporting landlords through every stage of their investment journey.
- The requirements for eligibility are simpler than you think. Really!
What is a buy-to-let mortgage?
Buy-to-let (BTL) mortgages are used to purchase residential investment properties, so they are specifically intended for landlords.
The investment can bring returns in one of two ways – or both:
- Generate a monthly income from receiving the rent and have a positive profit after paying the mortgage and all the other monthly expenses from the property.
- Long-term capital growth from the property increasing in value over time.
The buy-to-let mortgage can only be used for an investment property that you will let. This means that you can’t use it to buy a property that you intend to live in yourself, even temporarily, only those you intend to let out for profit.
The buy-to-let mortgage differs from residential mortgages in a few ways, even though they are used to buy residential properties.
The biggest difference is probably the way the affordability is calculated. Whereas residential loans to buy your own home are based on your personal income, buy-to-let mortgages are based on the potential yield (rental income) of the property you are buying.
That said, some lenders will also be willing to look at personal income alongside it – or may ask for a minimum income level outside of the specific investment property you are buying.
Make it easier for yourself – our friendly advisors are here to help.
Call us on
020 8517 1141
Criteria for buy-to-let mortgage
The criteria to qualify for a buy-to-let mortgage is different than for a residential mortgage (the house you live in), but as with any mortgage type, vary from lender to lender.
Usually, the lenders will require the following:
- Minimum of 21 years (or in some cases 25) – maximum age limits are a bit more flexible for BTL.
- Some lenders will prefer you to be a homeowner, but there are flexible lenders that allow landlords to be first-time buyers.
- Most lenders are not focused on your personal income. For the ones that will ask to check it, the average minimum income requirement is around £25,000.
- You will need the potential rental income of the property to be between 125% and 145% of your monthly mortgage repayments when using an increased stress rate to allow for future increases in rates. The calculation will depend on your tax rate and whether you are purchasing in your personal name or a limited company.
- The loan to value (LTV) can go up to 80%, which means that the minimum deposit required can be as low as 20%. The higher the yield, the more chance you will be able to borrow a higher loan to value as there is more income to cover the repayments.
How to calculate the yield
Property yield, often referred to as rental yield, is a fundamental metric used by mortgage lenders to determine the financial viability of any property investment.
It represents the annual return on investment (ROI) generated through rental income and is expressed as a percentage of the property’s value.
Lenders will want to know this metric to assess the income-generating potential of a property and the likelihood of mortgage repayments being met.
How to calculate the yield of a buy-to-let property
To calculate property yield, you need to consider two primary factors: the property’s rental income and its market value.
Rental income refers to the amount you can expect to receive from tenants over a year, while the property’s market value is its current estimated worth. By dividing the annual rental income by the property’s market value and multiplying the result by 100, you can determine the property yield as a percentage.
Property yield plays a fundamental role in determining the profitability of an investment. Mortgage lenders rely on this metric to calculate the risk associated with lending against a particular property.
Higher property yields indicate stronger potential returns, which is a positive signal for lenders.
A higher yield means that the rental income generated from the property is significant compared to its market value, making it more likely to cover mortgage repayments and associated costs. The higher the yield, the higher your profits.
Different types of buy-to-let mortgages
There are multiple types of buy-to-let mortgages available, depending on your need:
- Standard – Widely available, used for single-family rentals.
- Regulated – Usually used where the purchased property will only be rented to close family.
- Let-to-buy – This is a scenario whereby you take 2 mortgages at the same time if you want to buy a new private residential home but keep your existing property to let out for rental income. Your home is transferred to a BTL mortgage, and a new residential mortgage is taken out for your new home.
- HMO – HMO (house of multiple occupancy) mortgages are for properties that will be rented to 3 or more individuals from different families who will be sharing at least 1 facility (bathroom, kitchen etc.). This may or may not require a licence, depending on the local authority where the property is based.
- Large HMO – For properties that are to be rented to 5 or more people from different families that will be sharing at least 1 facility. A licence is always required for a large HMO in the United Kingdom.
- Portfolio mortgage – Available to landlords with 4 mortgaged buy-to-let properties or more and allows them to manage all properties through a single mortgage.
- Limited company buy-to-let – This is where a limited company is used as a Special Purpose Vehicle (SPV) to purchase a property or several properties – there are tax benefits associated with buying through a limited company. (Please consult your tax advisor).
- Expat buy-to-let – it is an opportunity for a UK national living abroad to invest in a buy-to-let property in the United Kingdom.
- Large loan buy-to-let (£1M+) – Mortgages for residential properties worth more than £1 million. High Net-Worth Individuals (HNWIs) can have more complex financial situations, and there are specialist mortgages available from private banks and specialist lenders that understand complex income and ownership structures.
- Multi-Unit Freehold Block (MUFB) – This is a mortgage specifically designed for properties that consist of multiple units or apartments within a single building. This type of mortgage is typically used by property investors or developers who own or wish to purchase an entire block of flats or apartments.
Key considerations for buy-to-let mortgages
- Maximise rental income: Explore the promising potential of generating steady rental income by investing in buy-to-let properties. With thorough research and strategic property selection, you can tap into high-demand locations and secure attractive rental rates.
- Financial growth and stability: Buy-to-let mortgages offer a path to long-term financial growth and stability. By carefully assessing your affordability and understanding the financial commitments, you can leverage favourable interest rates to build a profitable portfolio of income-generating properties.
- Diversify your investment portfolio: Real estate stands the test of time as one of the most established and secure forms of investment, offering a proven track record of stability and resilience compared to newer investment models – all the buy-to-let options create the possibility of a very diverse real estate portfolio.
- Professional guidance and support: Gain valuable insights and advice from our mortgage experts. At the same time, you will never be alone and have the guidance of our experienced team. You will be in the driver’s seat, making all the decisions, but we will always be by your side.
- Secure a retirement income: Buy-to-let mortgages have the potential to create a reliable and sustainable retirement income stream. By strategically building a portfolio of income-generating properties, you can ensure a steady flow of rental income to support your financial needs during retirement, providing peace of mind and financial security.
- Leave a lasting legacy: Invest in buy-to-let properties to create real assets that can be passed down to future generations. Through effective succession planning, you can build a tangible inheritance for your loved ones, providing them with valuable real estate assets that can appreciate over time and serve as a foundation for their financial well-being.
Buy-to-let mortgages can be not only a pathway to financial success and personal growth but also a means to secure your retirement income and leave a lasting legacy for your family.
With careful planning and a forward-thinking approach, you can make this investment avenue a cornerstone of your financial strategy, setting the stage for a prosperous future for generations to come.
Give us a call, and we will book a quick meeting, and you will have precise answers about how close you are to purchasing your buy-to-let property investment.
020 8517 1141
How HOM can help with your buy-to-let mortgage
Buy-to-let mortgages can be more complex to arrange than traditional residential mortgages, even if you are an experienced landlord.
Taking advice from an experienced mortgage advisor with up-to-the-minute knowledge about rates and lender criteria can take a lot of stress out of the equation.
As a buy-to-let specialise, we have particularly strong knowledge in this lending niche and can ensure that you find the right type of deal for your needs, whether you are an experienced portfolio landlord or just starting out with your first investment.
We can provide tailored buy-to-let advice and help you structure your business to maximise profits and ease the administrative burden of taking out a mortgage.
Make it easier for yourself – our friendly advisors are here to help.
Call us on
020 8517 1141
What is the minimum deposit required for a buy-to-let mortgage?
It can be as low as 20%, depending on the lender and your affordability. We provide same-day quotes. Give us a quick call and discover yours today.
How is the rental income assessed for mortgage affordability?
The rental income needs to be 125% or up to 145% of your monthly mortgage repayments when using an increased stress rate to allow for future increases in rates. The calculation will depend on your tax rate and whether you are purchasing using your personal name or a limited company. All lenders will use a different stress rate, so speak to us for an accurate quote.
Can I get a buy-to-let mortgage if I already have a residential mortgage?
Yes! This will generally go in your favour, as most lenders prefer landlords to be homeowners.
What are the tax implications of owning a buy-to-let property?
It depends on whether you buy as an individual or a limited company. As an independent landlord, you are liable for income tax, but limited companies pay corporation tax on their income. Your accountant is the best professional for you to consult about your specific situation.
What is the difference between my residential mortgage and a buy-to-let mortgage?
The affordability is calculated differently. For your residential property (the house you will live in), the lender will take into consideration your personal income. For the buy-to-let property, the lender may or may not take your personal income into consideration, but its main focus will be the potential rental income of the property.
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Remember | Your home may be repossessed if you do not keep up repayments on your mortgage.
Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.