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Investment Property Mortgages Guide

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Aug 15, 2022

Investment property mortgages guide for UK buy to lets

The product category of investment property mortgages is vast and includes everything from commercial mortgages to buy-to-let loans. You’ve found the right place if you are interested in applying for one or just want to learn more about this type.

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Our guide to investment property loans will help you understand the different types of finance that fall under this category, how to obtain one, what rates to expect, and where to find the best advice.

In our FAQ section, you will find the most frequently asked questions from customers looking for financing to purchase a property or for investment purposes.

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What is an investment property loan?

A mortgage for investment property is a mortgage used to purchase property to generate rental income or a profit. This product category is broad and includes all types of properties, including commercial and buy-to-let properties. However, properties purchased for personal use are not considered investments.

The type of mortgage you need to finance your investment property depends on its category. There are separate product categories that can be used to…

These are all investment property mortgages. There are many sub-categories within each of these categories. Aside from buy-to-let, HMO mortgages or portfolio agreements can be used to finance offices, shops and factories. A broker specialising in mortgages for investment properties can help determine the type of finance you require and find the best deal.

We need to distinguish between investment property and second home mortgages. They are not the same thing.

Investment property vs second home mortgages

Second home mortgages offer a different product to investment property mortgages. They are residential mortgages that can be used for personal use. This includes vacation homes and secondary residences you may live in part-time.

A second mortgage would not be approved to purchase an investment property. These residential loans cannot be used to buy properties the buyer doesn’t intend to live in.

Is it possible to get a second mortgage on a rental property?

Yes. You can get a second mortgage and a primary residential mortgage to purchase an investment property. Some investment mortgage lenders may insist that you have a mortgage. Some buy-to-let companies won’t lend money to people who haven’t paid a residential mortgage for some time.

This example is to take out an investment mortgage and a residential mortgage to avoid confusion. An investment mortgage is a second mortgage. However, it would not be a second home mortgage. They are a product category and a completely different fish.

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How to obtain a mortgage to finance an investment property

The process can vary depending on the type of investment property being pursued. To begin your journey, there are two steps you need to take.

  • Do your homework: Read up on the criteria and rules for the type of investment you are considering. Below are summaries and further details. Doing your homework will help you determine the documents and lender requirements you will need to get approval.
  • Talk to a broker specialising in financing investment properties: This is crucial if you want the best advice and deal for your investment mortgage. Talking to the right broker before you apply will help you.Enquire here

Mortgages to buy-to-let

A viable investment is essential to having a mortgage lender approve it. Most buy-to-let mortgage lenders base their eligibility criteria on the property’s rental potential. The projected income must cover the mortgage payments by a minimum of 125%. In some cases, it may be higher.

Buy-to-let mortgage lenders base their lending decisions on these factors and the projected rental income.

  • The minimum amount you will need to get a mortgage is 15%. However, some lenders may ask for more, mainly if there are any risks.
  • Credit history Although your credit score is the most important; specialist lenders are available for customers with poor credit.
  • Income and outgoingsSome lenders don’t require a minimum income to get a loan, while others won’t lend anyone with less than £25,000. Providers will consider any outgoings that are significant in their affordability calculations.
  • Experience as a landlord: Although some BTL lenders offer mortgages to first-time tenants, landlord experience is usually a plus.

These are the main factors a lender will consider when you apply for a buy-to-let mortgage. However, you can find the complete criteria in our comprehensive guide to buy-to-let mortgages.

Commercial investment mortgages

These are the main criteria for commercial property investment mortgages:

  • Investment viability: Commercial mortgages are more flexible than traditional buy-to-let mortgages. This sector is not regulated so that lenders can evaluate each case individually. A solid business plan and viability are vital factors. Although this is not always essential, lenders want to see a track record in the industry.
  • Requirements for commercial investment mortgages are generally higher and can be expected to ask for between 25-50%.
  • Credit history Having good credit may give you better chances of getting the best rates. However, because of the flexibility of the commercial sector, there are often lending opportunities for retail investors borrowers with adverse credit.

Our guide to mortgages explains the criteria and steps required to apply.

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Holiday rentals

Investment mortgages for holiday homes are similar to buy-to-let mortgages. Lenders expect at least 140% coverage. Most mortgage lenders may have higher deposit requirements and start at 25%.


Buy to Lets from Overseas

Overseas investment mortgages, also known as holiday lets, are another sub-field of buy-to-let. The rules and criteria are the same, but remember that there are different requirements for rental income and deposit requirements depending on where you are buying.

You should also be aware of the tax implications of investing within certain territories, whether planning permission may be required and how the local currency rate might affect your investment. To find tenants, you might need the assistance of a local agent.


Sell mortgages

You can buy to sell mortgages to finance the purchase of a property you plan to renovate and then sell it for a profit. They can be used as investment mortgages but are residential mortgages with shorter terms. Usually, the mortgage term is between a few months and several years.


Talk to an investment mortgage broker about why you should get started.

A broker who is a specialist in your type of finance will be able to help you kickstart your investment mortgage application. Many brokers in our network specialise in overseas property, including commercial mortgage specialists, holiday-let advisors, and buy-to-let experts.

We can help you find a mortgage broker who advises on any type of investment, no matter what.

An investment mortgage broker can tell you which lenders offer the most favourable rates for customers with specific needs and circumstances. You can be sure that you will find the right lender the first time and get the best deal.

A broker will search all the markets for you and find every product that matches your requirements. They will also offer personalised advice throughout the process and assist you with paperwork.

The market is vast and confusing, so if you try to navigate it yourself without an investment mortgage broker, you could pay more, spend more time searching for the right product, and have unneeded marks on your credit report.

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Rates of mortgages for investment properties

Investment mortgages have higher interest rates than residential mortgages of the same size and value. BTL mortgage rates are generally 1% higher than similar residential products. Fees can also be higher.

Commercial mortgage rates are custom-made and determined by the lender according to the risk involved. They will examine your credit history, deposit amount, and trading history to determine the risk.

Accessing multiple lenders and meeting all eligibility requirements is key to getting the best investment mortgage rates. A mortgage broker specialising in investment properties will significantly increase your chances of landing the highest rates. They have access to all lenders on the market and can advise you on optimising your credit and improving your eligibility.

Rates for second home vs investment properties

Buy-to-let mortgage rates are usually higher than those for residential mortgages on homes of similar size and value. Mortgage lenders believe there is a greater risk of default when tenants are involved, mainly if there is risk of anyone not being in the property at any times.

Alternatives to investment mortgages

Other than a mortgage, many other options could help you raise money to purchase an investment property. These would include…

  • Remortgaging properties that you already own: Depending on the equity in your other properties, you could remortgage one or several of them to free up capital to purchase a new investment property or put towards it. Landlords often use this method with large property portfolios to expand their business.
  • Bridging loans If you want to purchase an investment property quickly, a bridge loan may be the best option. To pay off the debt, you could remortgage to an investment mortgage later.
  • Second-charge mortgages It may be possible to obtain a second-charge mortgage against properties you already own, provided you meet the lender’s criteria and have sufficient equity. If borrowers don’t meet the criteria to qualify for an investment mortgage but have enough equity, this might be an option.
  • Development finance Only if you can either build or supervise your investment property. This would most likely require remortgaging to a traditional investment mortgage later on.

A mortgage broker can help you decide which option is better than an investment mortgage. A mortgage broker will be able to discuss each option with you and weigh up the pros and cons to help you make informed decisions about your property investment.

Do you need a mortgage to finance an investment property? Ask for help!

Are you looking for advice on investment property mortgages?

Our free broker-matching service will consider your investment type, needs, and circumstances to match you with the best expert.

Talking to the right broker before applying for your mortgage can save you time, money, and possibly disappointment.

We can help you find a rental property or a broker to buy your commercial property.

We’ll arrange a complimentary, no-obligation conversation between you and your ideal investment broker.

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What is the maximum number of investment property mortgages I can have?

Some lenders cater to portfolio landlords who have unlimited properties. However, some lenders may restrict how many buy-to-let loans they are willing to lend to an applicant or the amount to fund their portfolio.

Buy-to-let mortgages typically have a cap of three to 10 properties. The maximum borrowing for one application is around £3 million.

A specialist mortgage broker can help you find a lender willing to finance multiple properties.

Can I get a second mortgage for my rental property?

Yes, you can get a second mortgage on an investment property that you have a buy-to-let mortgage against. As long as there is enough equity and the lender is confident your rental income will cover the BTL debts.

This is called a second-charge mortgage buy-to-let. The debt you would take on would be in addition to any existing mortgages on the property. If the property is repossessed or offloaded, the second-charge mortgage lender would be the first to receive any proceeds.

How to obtain a second mortgage on a rental property

To learn more about these products and how you can apply, visit our second-charge buy-to-let mortgages guide.

Can I get a mortgage for a second investment property?

Lots of investment lenders will offer multiple investment mortgages to one person or company, but only if they show they earn enough to pay all the mortgages.

Some brokers and mortgage lenders specialise in portfolio landlords, a group of people with multiple investment properties.

Enquire here today to begin your journey.

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