Buy-to-let mortgages

Lender criteria

What lenders actually assess

Rental cover. Lenders apply a stress test, checking that the expected rent covers the mortgage payment by a margin at an assumed interest rate well above the actual pay rate. This is the number that most often decides how much you can borrow, and it catches people out.

Deposit. Typically at least 25%, sometimes more depending on the property and the lender.

Your own position. Many lenders want to see a minimum personal income, often around £25,000, and prefer applicants who already own their own home.

The property. Flats above commercial premises, houses in multiple occupation and non-standard construction all narrow the field of available lenders considerably. On a leasehold flat the remaining lease length and the service charge both matter, and cladding or an outstanding EWS1 form can stop a purchase entirely.

The numbers

The costs that eat into the yield

A property that looks profitable on rent alone often looks quite different once everything is counted.

• The Stamp Duty surcharge on additional properties
• Letting agent fees, typically 10% to 15% of rent for full management
• Landlord insurance, which is not the same as normal buildings cover
• Maintenance, and a sinking fund for the boiler you will eventually replace
• Void periods between tenancies
• Tax on rental income, and restricted relief on mortgage interest
• Compliance costs including gas safety, electrical checks and EPC standards

Structure

Personal name or limited company

This is primarily a tax question and it depends on your other income, how many properties you plan to hold and what you intend to do with the profit. It is not a question we can answer for you.

Speak to an accountant or tax adviser first. Once you and they have settled on the structure, we will arrange the lending to fit it.