Landlord mortgages

Landlord mortgage eligibility and criteria

You can get a mortgage as a landlord whether you own one rental property or many, and whether you hold personally or through a company. Lenders assess a landlord mortgage on the rental income the property produces, the interest cover ratio that rent gives against their stress rate, the loan to value, and your experience as a landlord. Many lenders want a minimum personal income, often around 25,000 pounds a year, though others lend on the rent alone. First time landlords are accepted by a good number of lenders, while others want an existing property, so eligibility is a question of matching the case to the right criteria. Portfolio landlords with four or more mortgaged buy-to-let properties are assessed across the whole portfolio under the PRA rules, which means the business plan, the cash flow, the assured shorthold tenancy agreements and the EPC ratings on the stock all form part of the underwriting. We package the rental evidence and the portfolio schedule so the case runs cleanly. There are landlord mortgage products for almost every situation, from a first buy-to-let to a complex portfolio, and part of managing a growing portfolio is choosing the right products each time and borrowing only what the rent comfortably covers, whether you are new to letting or already hold several. All criteria are indicative, vary by lender, borrower and property, and are not an offer of finance.

How much can a landlord borrow?

A landlord can borrow against the value of the property and the rent it produces, indicatively up to 75 to 80 percent loan to value, so a deposit of around 20 to 25 percent, with the exact loan set by the interest cover ratio the rental income supports against the lender's stress rate. A higher rent relative to the loan gives more headroom, which is why higher yielding property and lower LTV cases pass the stress test more easily. Where the rent is tight, some lenders accept top slicing from your other income to bridge the gap. Across a portfolio, borrowing scales with total rental income rather than a single salary multiple, so a landlord can support far more lending than a residential borrower on the same income, whether you are buying your first rental or already hold several. On a remortgage, the same maths releases equity from an existing property for the next deposit. It is worth getting a mortgage in principle before you offer, since a decision in principle shows agents you can proceed. We model the interest cover on our buy-to-let mortgage calculator before approaching lenders, so the case goes to market at a level that will actually fund. The figures are illustrative, vary by lender and property, and are not an offer of finance.

Landlord mortgage rates and fees

Landlord mortgage rates depend on the loan to value, the interest cover ratio and the product fee, and buy-to-let mortgage rates generally sit above residential rates because the lending is investment lending. As an indication, two and five year fixed buy-to-let mortgage rates currently range from around 4.5 percent to 6.5 percent, with the lowest headline rates usually carrying a higher arrangement fee. We compare products across the whole buy-to-let market rather than one lender's range, and you can size the numbers yourself online with our mortgage calculators and tools before we apply. Expect a lender product fee, a valuation fee and legal costs alongside the rate, plus any early repayment charge if you redeem inside the fixed period. Lenders stress test the rent at a notional rate, and a five year fixed is usually stress tested more gently than a two year, which can lift the achievable loan, so the cheapest headline rate is not always the one that borrows the most. Interest only keeps the monthly cost down and the rental yield working, with the capital repaid on sale or refinance. We disclose our broker fee in writing and quote the all in cost so cases can be compared properly. The figures are indicative and not an offer of finance.

Personal name, limited company or portfolio landlord

How a landlord holds property shapes the mortgage and the tax. Holding in a personal name is simplest for a first property, but since the section 24 changes restricted mortgage interest relief for individual landlords, many higher rate taxpayers building a portfolio have moved to a limited company or SPV, where a company offsets interest in full and pays corporation tax on profit. Once a landlord passes four mortgaged properties they are treated as a portfolio landlord and the whole portfolio is stress tested together, which changes both the underwriting and the choice of lender. Whether to incorporate, and whether to move existing property into a company, turns on your income, your plans and the stamp duty and capital gains tax on any transfer, and it is a decision for you and your tax adviser. We do not give tax advice. What we do is arrange the mortgage in whichever structure you choose, and structure a portfolio that spans personal and company ownership. Whichever route you take, investing in buy-to-let is a long term commitment: the rates you are offered, the tenancy agreement you sign and the borrowing you take on all matter more than they would on a home you live in, and they are worth reviewing at each remortgage whether you are new to it or already hold a portfolio. Reviewing rates on time, before an existing deal reverts, is one of the simplest ways to protect the return on your borrowing. Where a case would be a regulated mortgage contract or a consumer buy-to-let, for example letting a former home to family, we refer it to an authorised firm.