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Buy to let mortgage criteria

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 6, 2022

Buy to let mortgage criteria

We have provided a summary of the buy-to-let mortgage eligibility lending criteria UK lenders use to evaluate aspiring borrowers.

Also, information that will assist you in deciding if a buy-to-let mortgage product is right for you.

Our FAQ section has answered some of the most common questions about buy-to-let mortgage eligibility.

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The UK’s buy-to-let mortgage eligibility criteria

It can be challenging for applicants without a residence to get a buy-to-let mortgage. However, it is possible. While most mortgage lenders require strict eligibility criteria, some lenders are more flexible.

Some lenders are willing to work with limited businesses and poor credit history. However, it is not impossible to find the right lender. These situations require that you have access to all the markets.

The advisors we work alongside have this ability. Enquire to find the best buy-to-let mortgage broker to help you.

When assessing whether a borrower meets the buy-to-let mortgage eligibility requirements, most UK lenders will consider the following:

General BTL Mortgage criteria

  • Income/affordability
  • How much Deposit
  • Credit history
  • Status as a Borrower
  • The borrower’s age
  • No matter where they are located in the UK

Unless you are a specialist broker, you only have access to a third of the Buy To Let mortgages that are available. To unlock the whole market, get started by contacting us today.

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Criteria for income and affordability

Some lenders require a minimum income requirement to buy a residential mortgage. This is especially true if you are a first-time landlord.

Some lenders will accept borrowers with a lower income. However, it is possible to find BTL providers that do not require income requirements. They will instead base the deal on the rental potential of the property.

Most lenders will be satisfied as long as the mortgage payments are covered by 125-130% (more if you have a higher rate taxpayer).

You could also consider your income type

Lenders who require a minimum income may be interested in your method of making money. While a substantial PAYE income is desirable, it doesn’t necessarily mean that you won’t find a deal if your goal is to get a self-employed mortgage or receive other benefits income.

Are you required to show income to get a mortgage to buy to let?

Lenders that require you to show proof of income for buy-to-let mortgages have particular requirements. Most lenders will need three years of records if you are self-employed. Others will accept two, one, and one month. Contact us today to speak with a specialist broker; we will ensure you have the best mortgage deal.

Additional capital (e.g., bonuses and commissions) can make up a part of your income. A specialist lender might be needed if you have extras, commissions, or other benefits. Not all lenders consider them, and some impose limits on how much they will include.

Lenders will require proof that your rental income will be sufficient to cover mortgage payments. You will need a letter from an ARLA-approved letting agent to prove that you have this income.

The lender may also consider your outgoings

The lender might also consider your income when assessing your ability to repay any outstanding loans. The provider may limit the amount you can borrow if you have significant outgoings.

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Criteria for deposit

Buy-to-Let Mortgages typically require a higher deposit than residential. Buy-to-let mortgages have a typical loan-to-value ratio of 75%. However, specialist lenders can offer 80% or even 85% depending on the circumstances. You will need to deposit at least 15% and sometimes even more.

The amount a lender requires for a buy-to-let deposit depends on several factors. Bad credit and nonstandard construction can increase the risk of a mortgage agreement, so the provider might ask for a larger deposit to protect themselves.

Knowing where your deposit came from is also essential, as this may limit the number of available lenders. Those with unusual deposit sources such as overseas investments or cash savings should seek specialist guidance.

Credit history

Lenders who are flexible with applicants with poor credit histories should be considered.

Many UK mortgage providers are cautious about customers without a credit history, people with county court judgments against them and borrowers with individual voluntary agreements (IVAs). They also caution those who have an account of defaults or late payments.

You can get a BTL loan with bad credit. Some specialist lenders deal with potential borrowers with such issues every day. The advisors we work closely with are also experts in this area. They will connect you to the most favourable lender.

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What are the requirements for professional landlords when it comes to mortgages?

An established landlord is likelier to pass the lender’s buy-to-let mortgage eligibility tests than a first-time buyer. However, some providers are cautious about borrowers with large portfolios. They limit their offer to four buy-to-let mortgages. These customers would be classified as portfolio landlords. Exceptions to this rule include a few that have no buy-to-let limits.

Is there a minimum age for landlords who rent out their properties?

Lenders may consider age when determining eligibility for buy-to-let mortgages. Although the minimum age for applicants in the UK is 18, some lenders won’t work with applicants under 21.

On the opposite end of the spectrum, some lenders will lend to applicants until they are 75. However, for others, the limit is 85, and a few lenders do not list any age restrictions in their buy-to-let mortgage criteria.

Read our guide on buy-to-let mortgages for those over 60 to learn more.

Use of property

The lender may also consider property usage. While most mortgage lenders will lend to someone who plans to offer short-term assured tenancies, a specialist lender like the one we can connect you with, such as the ones our advisors work with, may be needed for buy-to-let properties with multiple occupants (HMOs), student flats, or holiday/short terms.

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Rent income to pay a mortgage repayment on a buy-to-let property

Negotiating the term should be done in accordance with your repayment mortgage plan. Calculate how long it will take you to repay the balance using the tenants’ monthly rent if you plan to use income from tenants to pay the loan off.

It would take 18 years for a £100,000.00 mortgage to be paid off using 4% interest and rental income of £650 per month. This applies only to BTL repayment loans unless there are overpayments.

To settle the debt, you can sell the property

The most extended term may be best if you plan to sell the property to pay the remaining amount. You’re allowing your property to rise in value, which will help you pay off the entire loan and make a profit when the property is sold.

There are many ways to pay off your end-of-the-term debt. These include selling other properties, endowment policies, stocks and shares, and advisors can help you determine which repayment vehicle is best for you.

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Speak to an expert in buy-to-let today

A broker can provide professional advice if you have questions about the buy-to-let mortgage criteria. A broker can help you assess your eligibility and find the best buy-to-let mortgage for you. They will provide you with personalised advice and assist you with all paperwork.

Our broker-matching service is free and will match you with an expert with a proven track record of helping people like you obtain a buy-to-let mortgage. We offer a complimentary broker-matching service. Call us today or enquire online.

We’ll arrange a no-obligation chat with you that could save you time and money.

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Buy to let mortgages criteria FAQs

Who can obtain a mortgage to buy and let?

Anyone who meets the buy-to-let lender’s eligibility and affordability requirements is eligible. Although lenders prefer BTL applicants to have a property to call their own, more lenders recognise the need to approve BTL buyers with accommodation from their employers.

Some factors such as income, age, property type, and bad credit might make some applicants unqualified. However, suppose you have whole-of-market market access. In that case, it might be possible to locate a specialist provider with the proper criteria and terms to offer you a favourable deal.

What is the maximum amount I can borrow?

To determine if a buy-to-let mortgage is feasible for someone in your situation, you must first assess how much money you can borrow. This is slightly more difficult than residential mortgages.

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What if the rental value falls below what I am eligible for?

If the property’s rental value isn’t high enough, the loan-to-value (LTV) might be lower. Therefore, the total investment must show that the mortgage payments can be supported by rental income in an appropriate amount.

Although calculating this can differ from lender to lender, most lenders insist that the rental income should be between 125% and 1300% of the mortgage payment. They calculate the mortgage payments using the actual rate (pay-rate) or a fixed rate of 5+%.

Example: A mortgage for £75,000 with a rental assessment at 125% and 5% interest…

£75,000 x 5% = £3750/12 (months) = £312.5 x 125% = £390 rental income required.

It will require some maths, but we can help you with that. Our advisors will determine whether your affordability meets the buy-to-let mortgage affordability criteria that most UK lenders demand. There may be alternatives, even if you don’t meet the requirements.

Is top-slicing possible to help me get a BTL mortgage

Top-slicing refers to when a lender uses a borrower’s personal income to cover any rent shortfall to pay the loan amount. This could be an option if the projected rental income is insufficient to cover the mortgage payments.

Only a few lenders will allow top-slicing. This is because they only want to lend money to landlords with high incomes and low outgoings.

This may be an option for you. Get in touch with us if you feel it might be. The whole-of-market advisers we work with can help you identify the best provider based on your situation and BTL mortgage criteria.

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What are the legal requirements?

You will find the following list of legal requirements for UK landlords.

  • Gas safety:
    Every landlord in the UK must have an annual inspection of their property’s gas supply appliances by a registered gas engineer.
  • Electric safety:
    Before a new tenant can be established, an electrical safety inspection must be performed by qualified electricians.
  • Energy performance certificates
    A current energy performance certificate must be provided for any UK property that is being marketed in the UK as a rental or sale. For more information, please visit the Energy Saving Trust.
  • Tenancy deposit schemes:
    All landlords in the UK must deposit tenant deposits into either insurance or custodial managed account and provide renter details within 14 days.
  • Landlord Insurance:
    You might be required by lenders to have landlord insurance coverage for your buy-to-let property. This will cover you if there is fire or flood damage and protect your income stream, which can dry up during one of these disasters.
  • Furniture Regulations:
    UK landlords must ensure that all furniture complies with current fire regulations.

Contact us today for further help or advice.