Buy-to-Let (BTL) mortgages are mortgages meant for landlords who need funds to buy more property to rent out. The rules of acquiring BTL mortgages are like those of regular mortgages, with a few key differences. They can also be difficult to obtain, especially if you, the applicant, don’t own residential home. BTL mortgage lenders use very strict eligibility criteria to qualify applicants for their loans. Some, however, are more flexible and improve your eligibility chances. Read on for more information on how Buy-to-Let mortgages work.
1. Who Can Qualify?
• You can get a BTL mortgage under the following circumstances:
• You must be 18 and over. Some providers may refuse to deal with applicants under 21 or 25 years.
• You already own your own residential home
• You understand the risks involved in investing in property
• You have good credit and are not stretched too much on other borrowings like credit cards
• You are under a certain age. Most lenders have upper age limits, which is typically between 70 and 75. Other lenders allow for an age limit of up to 85 years.
• You earn £25,000+ annually. You may struggle to find a lender to approve your BTL mortgage if you earn less, but not impossible.
2. Income and Affordability Criteria
Most buy-to-let mortgage lenders insist that applicants meet a minimum income requirement of £25,000+ a year, especially if you are a first-time landlord. However, some more flexible lenders will accept applicants with lower personal income. You can also look for a BTL mortgage lender who bases the deal on your property’s rental potential. In such agreements, your rentals must be able to cover the mortgage payments by 130%.
3. Buy-To-Let Mortgage Requirements for Professional Landlords
Professional, established landlords are more likely to pass the lender’s mortgage eligibility checks compared to first-time buyers. Even so, there are providers who are cautious of borrowers with large portfolios. These applicants are classified as portfolio landlords, and lenders sometimes draw the line at four BTL mortgages. Some lenders, however, don’t have any buy-to-let limits, which favour established landlords more.
4. Repaying A BTL Mortgage Using Rental Income
If you plan on repaying your BTL mortgage using your rental income, ensure that you negotiate the term against the repayment plan. It is also crucial that you work out how long the monthly rent repayment plan will take to pay off the balance.
If, for instance, you took a £100,000 mortgage with 4% interest, then a £650 pm repayment can take 18 years.
5. Selling the Property to Settle the Loan
You can also sell your property to settle any outstanding BTL mortgage amount. If you think you can end up in such a situation, then it is best to take the longest term possible on your loan. This is the most feasible way to go as it gives you more time to find other options. Give your property a chance to increase in value so that it can cover the entirety of the loan, and possibly profit too when exchanging hands.
The Bottom Line
In a nutshell, any applicant who meets the BTL lender’s affordability and eligibility requirements can get the loan. It is how you use this loan that matters. You can buy more property and increase your investments and use them to repay the loan. Most BTL mortgage eligibility checks are usually very strict to protect both the lenders and applicants from loss. But generally, it’s a good deal.
Check your mortgage eligibility here on our Mortgage Calculator