A Guide to Applying for a Buy-to-Let Mortgage
If you’re planning on renting out the property you intend to buy, then a buy-to-let (BTL) mortgage is what you need. So that you have a clearer idea of what a BTL entails, we have put together this guide to help feel prepared for your application process.
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What deposit do I need for a buy-to-let mortgage?
When applying for BTL, the lender usually requires a larger deposit – in most cases 25%. This means that your loan to value (LTV) ratio will be 75%. The LTV is an underpinning factor in defining how risky a mortgage will be for the lender, where a low LTV means less risk and high LTV indicates high risk. Having a higher LTV (anything above 75%) does not mean you can’t get a BTL mortgage, but you may be more restricted in terms of lender choices.
How important is rental income when applying for a buy-to-let mortgage?
In comparison to other mortgage types, lenders will focus more on the rent you’ll be charging than on what you earn. Therefore, research rental prices for similar types of properties in your chosen location and find out what kind of tenants you’ll most likely have or who you want to target. Young professionals? Couples? Families? You get the idea. The clearer your concept is of how much rent you can and will charge, the easier it will be for the lenders to evaluate how much they are willing to lend you.
Should I use a broker for a buy-to-let mortgage?
When using a broker – someone who knows the ins and outs of the industry – you have a better chance of finding a good mortgage deal and usually have access to loans that aren’t readily available on the high street. This is especially the case if you’re looking to buy and let an unusual property or if you have any financial restrictions. An experienced broker will know his way around the different mortgage companies and can assist you in finding the best deal, without you having to sift through countless websites and articles.
What documents do I need when applying for a buy-to-let mortgage?
In most cases, lenders will require the following documentation:
- Latest bank statement (incl. the institution, your name, account number, as well as full months transactions and the salary credit)
- Latest or 4-weekly payslip
- An existing BTL and its property declaration form (if you already have a BTL)
- If you’ve received a gifted deposit
Some lenders will ask for a personal ID, while others do an electronic ID check. Your mortgage broker will let you know which is applicable or it will be mentioned during your application process.
In addition to this list, a lender may also ask to see other calculations or documents such as your outgoings, a forecast of your rental income (so that they know you’ll be able to cover the interest payments) and, if you’re self-employed, they may require 1-3 years worth of accounts.
Applying for a BTL is not the simplest of applications to prepare for. So we hope that with these tips help you get the necessary information together, and have clarified some of your questions. If you have any more queries, don’t hesitate to get in touch with one of our mortgage brokers.