Common Questions on Buy-to-Let Mortgages

At iam Mortgages, we are committed to helping people find the best mortgage deal possible. Here’s some of the most commonly asked questions we receive about buy to let mortgages from current and prospective landlords. If the answer to your question can’t be found below – get in touch by using our simple enquiry form to speak to our team of mortgage experts.

How do I work out the potential sum I can borrow on a buy to let mortgage?

If you take out a residential mortgage, the amount you can potentially borrow is figured out based on your current income and outgoings. A buy to let mortgage is different, and the amount you can borrow is calculated on the potential rental income you are expected to receive from renting out a property. Most lenders will require that rental income to be at least 125% of the regular mortgage payments paid by you. For instance, if your mortgage payment to the lender was £800 per calendar month, the rental income would need to be at least £1,000 each month.

If you’re still unsure about the amount you can borrow on a buy to let to mortgage, try our calculator to get a clearer idea of the amount you could borrow.

How much deposit shall I put down on a buy to let mortgage?

Like any mortgage, the greater the initial deposit, the lower your monthly payments will be. You’ll also be able to get a better deal, with a larger margin between your monthly mortgage payments and the amount you make each month in rental income. At iam Mortgages, we advise that you put down a deposit of at least 25% of the property’s total worth for a buy to let mortgage. Some lenders may let you put down a smaller amount, but this will vary from lender to lender.

Should I have an Assured Shorthold Tenancy (AST) agreement?

If you are renting a property that acts as a tenant’s home (i.e you are a private landlord), you should have an Assured Shorthold Tenancy (AST). If you apply for a buy to let mortgage, your mortgage lender will normally ask for proof of an AST to proceed with your application.

Can I have a buy to let mortgage on any kind of property?

There may be some restrictions when it comes to taking out a buy to let mortgage on a property. Generally speaking, a mortgage lender will want some proof from you that the property you are renting out is a low risk to them. They will consider the type of property you intend to rent, it’s location and current condition. Buy to let mortgages generally tend to have restrictions on the following types of property:

  • Flats that are new-build (you will most likely require a deposit of 30% or more for a buy to let mortgage on a new build flat).
  • Ex-local authority (taking out a buy to let mortgage will depend on the number of flats there are within the block, as some lenders will not be keen on flat blocks with multiple floors. The area the flat is based in will also be considered).
  • Commercial-based flats (i.e. flats above shops, restaurants etc.).
  • Holiday homes (a lender will want to borrow against a property that earns income all year round, not just for a few weeks or months every year).

Of course, not every lender will be restrictive, and securing a buy to let mortgage will also depend on your financial circumstances and the deposit you can put down. If you’d like further mortgage advice on buy to let mortgages and the type of property you intend to rent, get in touch with us at iam Mortgages by using our online enquiry form.

I am a first time buyer – can I purchase a buy to let property?

Our answer to this is that it depends – are you a first time buyer, or a first time landlord? You might be able to purchase a buy to let property, but you may be restricted in the number of lenders who will offer you a mortgage deal. For many lenders, it is important that any potential buy to let mortgage customer already has a residential mortgage in place for their own property. Our mortgage experts at iam mortgages will be able to advise you on your options if you want to take out a buy to let mortgage but do not own a property.

What does it mean when a house is ‘HMO’?

A house in ‘HMO’ means that the property is in ‘multiple occupation’. If you have a property which you are going to let out to several tenants who are not related, this is classed as a ‘House in Multiple Occupation’. Generally speaking, a property is given this classification if at least three people live in it, sharing kitchen and bathroom facilities. You may require a HMO licence if this is the case with your property. We advise that you check with your local authority to see if your property requires a HMO licence. Taking out a buy to let mortgage on a HMO property may have limitations, and there may be few lenders who want to offer a mortgage deal to you. Our mortgage advisors at iam Mortgages can offer help and guidance on buy to let mortgages and HMO properties. Fill in our query form and get in touch today.