BUY-TO-LET MORTGAGES
Buying your first rental property can involve different mortgage considerations from buying a home to live in.
Buy-to-let lenders will usually consider the property, expected rental income, deposit and the circumstances of the borrower before deciding whether they are prepared to lend.
Some lenders consider first-time landlords, although the mortgage options and criteria available can vary.
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Previous experience as a landlord is not a requirement for every buy-to-let mortgage. Some lenders are prepared to consider applicants buying their first rental property.
However, lender criteria differ, and the assessment can depend on the borrower, property, expected rent, deposit and wider circumstances.
01
THE BORROWER
The lender may consider factors such as income, existing commitments, credit history and overall financial circumstances.
02
THE DEPOSIT
The amount of deposit available affects the loan-to-value of the proposed mortgage.
03
THE PROPERTY
The property must meet the lender’s requirements for acceptable buy-to-let security.
04
THE RENT
Expected rental income can form an important part of the lender’s assessment of the proposed mortgage.
THE IMPORTANT POINT
Being a first-time landlord does not automatically prevent someone from getting a buy-to-let mortgage, but the lenders and products willing to consider the application can depend on the circumstances.
Someone buying their first rental property may also be a first-time buyer who has never previously owned a home.
This can be treated differently from an applicant who already owns their own home but is becoming a landlord for the first time.
Some lenders may consider first-time buyers for buy-to-let mortgages, while others can apply different criteria.
FIRST-TIME LANDLORD
Already owns a home
The applicant owns or has previously owned residential property but is buying a rental property for the first time.
PROPERTY EXPERIENCE
The applicant already has experience of residential property ownership.
NEW LANDLORD
They do not yet have a history of owning and letting rental property.
LENDER CRITERIA
The lender will assess the proposed buy-to-let mortgage according to its criteria.
FIRST-TIME BUYER & FIRST-TIME LANDLORD
Has never owned a property
The applicant is purchasing their first property and intends to let it rather than occupy it as their home.
NO PREVIOUS OWNERSHIP
The applicant has not previously owned residential property.
BUY-TO-LET PURPOSE
The property is being purchased as a rental rather than as the applicant’s home.
LENDER AVAILABILITY
The range of lenders willing to consider this type of application can differ.
THE IMPORTANT POINT
“First-time buyer” and “first-time landlord” describe different things. An applicant can be a first-time landlord without being a first-time property buyer.
The deposit required for a buy-to-let property depends on the mortgage, property and lender.
The deposit determines the loan-to-value, or LTV, of the mortgage. A larger deposit means a smaller proportion of the property’s value is being financed by the lender.
Different mortgage products can be available at different LTV levels, so the deposit can affect both the potential borrowing and the mortgage options available.
01
PROPERTY VALUE
The value accepted by the lender provides the starting point for calculating the mortgage loan-to-value.
02
DEPOSIT
The buyer contributes part of the purchase price from their own available funds or another acceptable source.
03
MORTGAGE
The lender finances the remaining amount, subject to its mortgage criteria and assessment.
PROPERTY PRICE
−
DEPOSIT
=
MORTGAGE REQUIRED
MORTGAGE REQUIRED
÷
PROPERTY VALUE
=
LOAN-TO-VALUE (LTV)
THE IMPORTANT POINT
There is no single deposit requirement that applies to every first-time landlord. The available loan-to-value can depend on the lender, property and circumstances of the application.
Buy-to-let borrowing is not normally determined by the purchase price or borrower’s income alone.
The lender may assess the expected rental income from the property, proposed mortgage, loan-to-value and the borrower’s wider circumstances.
Different lenders can apply different rental calculations and lending criteria.
01
EXPECTED RENT
The rent the property is expected to produce can form an important part of the lender’s assessment.
02
RENTAL COVERAGE
The lender may test whether the expected rent provides sufficient coverage for the proposed mortgage under its own calculation.
03
LOAN-TO-VALUE
The amount being borrowed relative to the property value can affect the mortgage options potentially available.
04
BORROWER CIRCUMSTANCES
Income, existing commitments, credit history and other circumstances may also form part of the assessment.
EXPECTED RENT
→
LENDER’S RENTAL ASSESSMENT
→
PROPERTY & BORROWER
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POTENTIAL BORROWING
THE IMPORTANT POINT
A property’s expected rent does not automatically determine how much can be borrowed. Loan-to-value, lender criteria and the borrower’s circumstances can also affect the outcome.
A first-time landlord is not necessarily restricted to one particular type of rental property.
However, the property must be acceptable to the mortgage lender, and some properties or letting arrangements can involve more specialist lending criteria.
The lender may consider the property itself as well as how it is intended to be let.
01
STANDARD HOUSES
A conventional house let to a single household may fall within mainstream buy-to-let criteria, subject to the individual property and application.
02
FLATS & APARTMENTS
Flats can be acceptable for buy-to-let lending, although the lender may consider matters such as the building, tenure and property characteristics.
03
HMOs & MULTI-LET PROPERTY
Properties let to several unrelated occupants can involve different mortgage criteria and may require more specialist consideration.
04
NON-STANDARD PROPERTY
Unusual construction, mixed-use buildings or other non-standard property types may be treated differently by mortgage lenders.
THE IMPORTANT POINT
A property being suitable as a rental investment does not automatically mean that every buy-to-let lender will accept it as mortgage security. Property criteria vary between lenders.
The property provides the security for the mortgage, so lenders can apply criteria to both its physical characteristics and the proposed letting arrangement.
01
PROPERTY VALUE
The lender will need an acceptable valuation for the property before deciding how much it is prepared to lend against it.
02
EXPECTED RENT
The property’s expected rental income may form part of the mortgage assessment.
03
PROPERTY TYPE
The lender may have criteria covering houses, flats and more specialist types of property.
04
CONDITION
The condition of the property can affect whether it is considered acceptable security for a mortgage.
05
TENURE & BUILDING
For some properties, factors relating to tenure, the building or other property characteristics may form part of the assessment.
06
INTENDED LETTING
How the property will be occupied and let can affect the type of mortgage and lender criteria that apply.
FOR A FIRST-TIME LANDLORD
It can be useful to consider mortgageability before becoming committed to a particular property.
A lender may assess the property differently from a buyer considering whether it appears to be a suitable rental opportunity.
What will a buy-to-let lender consider about the property?
The property provides the security for the mortgage, so lenders can apply criteria to both its physical characteristics and the proposed letting arrangement.
01
PROPERTY VALUE
The lender will need an acceptable valuation for the property before deciding how much it is prepared to lend against it.
02
EXPECTED RENT
The property’s expected rental income may form part of the mortgage assessment.
03
PROPERTY TYPE
The lender may have criteria covering houses, flats and more specialist types of property.
04
CONDITION
The condition of the property can affect whether it is considered acceptable security for a mortgage.
05
TENURE & BUILDING
For some properties, factors relating to tenure, the building or other property characteristics may form part of the assessment.
06
The property provides the security for the mortgage, so lenders can apply criteria to both its physical characteristics and the proposed letting arrangement.
01
PROPERTY VALUE
The lender will need an acceptable valuation for the property before deciding how much it is prepared to lend against it.
02
EXPECTED RENT
The property’s expected rental income may form part of the mortgage assessment.
03
PROPERTY TYPE
The lender may have criteria covering houses, flats and more specialist types of property.
04
CONDITION
The condition of the property can affect whether it is considered acceptable security for a mortgage.
05
TENURE & BUILDING
For some properties, factors relating to tenure, the building or other property characteristics may form part of the assessment.
06
INTENDED LETTING
How the property will be occupied and let can affect the type of mortgage and lender criteria that apply.
FOR A FIRST-TIME LANDLORD
It can be useful to consider mortgageability before becoming committed to a particular property.
A lender may assess the property differently from a buyer considering whether it appears to be a suitable rental opportunity.
Buy-to-let mortgages can be structured in different ways.
The mortgage products potentially available to a first-time landlord will depend on the lender, property, loan-to-value and circumstances of the application.
01
FIXED RATE
A fixed-rate mortgage normally keeps the interest rate unchanged for an agreed initial period, providing greater certainty over the rate during that time.
02
VARIABLE OR TRACKER
Variable or tracker mortgage rates can change over time according to the terms of the mortgage.
03
INTEREST-ONLY
With an interest-only mortgage, regular payments normally cover the interest rather than reducing the original mortgage balance. The capital remains to be repaid using an acceptable repayment strategy.
04
REPAYMENT
With a repayment mortgage, regular payments normally include both interest and repayment of part of the capital. Provided the required payments are made, the mortgage balance reduces over the term.
THE IMPORTANT POINT
The mortgage structure should be considered alongside the interest rate, fees, flexibility and wider mortgage terms. Availability depends on the lender and individual application.
The deposit is not the only amount that may need to be available when buying a rental property.
There can be costs associated with the mortgage, property purchase and ongoing ownership.
01
MORTGAGE FEES
Some buy-to-let mortgages include product, arrangement or other mortgage fees.
02
VALUATION & SURVEY
A lender may require a mortgage valuation, while a buyer may choose to arrange a separate property survey.
03
LEGAL COSTS
Legal and conveyancing work will normally form part of purchasing and mortgaging the property.
04
PROPERTY PURCHASE TAX
Property purchase taxes may apply depending on the location, transaction, ownership structure and purchaser’s circumstances.
05
INSURANCE & PROPERTY COSTS
Insurance and other property-related expenses may continue throughout the period of ownership.
06
MAINTENANCE & MANAGEMENT
Repairs, maintenance and, where used, letting or property-management services can create additional ongoing costs.
THE IMPORTANT POINT
The overall cost of becoming a landlord extends beyond the mortgage deposit and monthly mortgage payments. Initial transaction costs and ongoing property expenses should also be considered.
A rental property can potentially be purchased personally or through a limited company.
These are different ownership structures and can involve different mortgage products, lending criteria, tax treatment and legal considerations.
The appropriate structure depends on the individual circumstances, so the ownership decision should not be based on the mortgage rate alone.
BUYING PERSONALLY
The individual owns the rental property directly and applies for the mortgage in their own name.
OWNERSHIP
The property is legally owned by the individual.
MORTGAGE
The borrower applies for a personal buy-to-let mortgage.
LENDER ASSESSMENT
The lender assesses the borrower, property, expected rent and wider application according to its criteria.
TAX & LEGAL POSITION
The tax and legal treatment relates to personal ownership and should be considered separately from the mortgage.
BUYING THROUGH A LIMITED COMPANY
A company owns the rental property and applies for the mortgage.
OWNERSHIP
The property is legally owned by the company rather than the individual.
MORTGAGE
The company applies for a limited-company buy-to-let mortgage.
LENDER ASSESSMENT
The lender may consider the company, property and individuals connected with the company when assessing the application.
PERSONAL GUARANTEES
Depending on the lender and circumstances, personal guarantees from directors or shareholders may be required.
THE IMPORTANT POINT
Personal and limited-company ownership can have different mortgage, tax and legal consequences. The ownership structure should be considered before purchasing the property, with appropriate professional advice where required.
The precise process will depend on the property, mortgage and transaction, but a first buy-to-let purchase will usually involve several stages.
Understanding the mortgage position early can help establish what borrowing may potentially be available before becoming committed to a property.
01
CONSIDER YOUR BUDGET
Consider the funds available for the deposit as well as the other costs that may arise when purchasing and owning a rental property.
02
EXPLORE THE MORTGAGE POSITION
A mortgage adviser can discuss the circumstances, potential borrowing and types of buy-to-let mortgage that may be available.
03
IDENTIFY A PROPERTY
Once the potential mortgage position is understood, a suitable property can be considered. The property itself will still need to meet the eventual lender’s requirements.
04
MAKE A MORTGAGE APPLICATION
A mortgage application can be submitted to the selected lender with the required information about the borrower, property and proposed letting.
05
VALUATION & LEGAL WORK
The lender will normally arrange a valuation and the legal process will progress alongside the mortgage application. Additional information or checks may be required before the mortgage is approved.
06
COMPLETE THE PURCHASE
Once the mortgage, legal work and other requirements are satisfied, the purchase can proceed to completion. The responsibilities associated with owning and letting the property then continue after completion.
THE IMPORTANT POINT
A mortgage agreement in principle or an initial discussion about potential borrowing is not a guarantee that a mortgage will ultimately be offered. The lender will need to assess the full application and property before making its lending decision.
No obligation to proceed.
Explore more about deposits, borrowing, eligibility, mortgage rates and the different ways of purchasing a rental property.
BUY-TO-LET DEPOSITS & LTV
Learn how deposits and loan-to-value can affect potential buy-to-let mortgage options.
HOW MUCH CAN I BORROW?
Learn how expected rent, rental coverage and lender criteria can affect potential buy-to-let borrowing.
ELIGIBILITY & CRITERIA
Learn about the borrower, property and financial factors lenders can consider when assessing a buy-to-let application.
BUY-TO-LET MORTGAGE RATES
Learn how buy-to-let mortgage rates, fees and different mortgage structures work.
COSTS & FEES
Explore the mortgage and wider costs that can arise when purchasing or remortgaging a rental property.
LIMITED COMPANY BUY-TO-LET
Learn how buying a rental property through a limited company can differ from purchasing personally.
COMMON QUESTIONS
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Buying your first rental property?
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Your property may be repossessed if you do not keep up repayments on your mortgage.
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