Commercial Buy-to-Let Mortgage Criteria
Buy-to-let mortgage criteria differs from the residential mortgage process. Find out more about the process of becoming a buy-to-let investor to generate revenue.
Many investors choose to purchase a buy-to-let property to potentially generate revenue alongside a longer-term asset.
Purchasing a buy-to-let property follows a different process to a residential purchase, particularly if you are purchasing the property with a mortgage. There are some key differences when it comes to buy-to-let lending criteria, tax implications and finding the right tenants.
The first step to purchasing a buy-to-let property is to ensure that your finances are in order for the purchase. You can then move on to finding a property and agreeing an offer on the purchase – this may be quicker if the property is already used as a rental, but this is not always the case.
To find out more please contact us via email at ALREFenquiries@arbuthnot.co.uk with brief details of your proposal including your contact details.
Understanding buy-to-let mortgage criteria
Borrowing with a buy-to-let mortgage usually depends on the rental income that you receive from a property, though other income will be considered. Many lenders will advise in their buy-to-let mortgage criteria that rental income needs to be 25%-45% higher than your mortgage payment.
The criteria for buy-to-let mortgages for investors is usually a larger deposit than residential homebuyers. At Arbuthnot Latham, we typically see investors borrowing up to 65% of a property’s value.
This can mean that interest rates are more competitive as the loan to value (LTV) is seen as less of a risk to mortgage lenders.
You may also find that the buy-to-let lending criteria contains different eligibility conditions, so it is important to familiarise yourself with this at the beginning of the process. You will also need to decide whether a repayment or interest-only mortgage is the right choice for your investment property, eligibility for this will depend on your LTV.
Interest rates can be higher with a buy-to-let mortgage than a residential property. Fixed and variable rates are usually available, and the term of the mortgage can be adjusted as needed. There may be product fees, survey costs and legal fees usually associated with property purchases. Stamp Duty Land Tax is also higher on properties that are purchased as a buy-to-let.
How much can you borrow with a buy-to-let mortgage?
At Arbuthnot Latham we typically offer lending solutions to introducers and clients between £1m to £20m, subject to suitability and tailored to requirements of the investor.
We also fund investors who have a portfolio of properties, corporations investing in buy-to-let and those who have a single buy-to-let investment property.
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What types of properties can a buy-to-let mortgage be secured on?
A buy-to-let property should be in good condition as this will determine the rental income that the property generates, along with the rental yield used to assess the amount that you can borrow due to buy to let lending criteria.
At Arbuthnot Latham we will accept licensed, good quality Houses of Multiple Occupation (HMO) where it fits with buy-to-let mortgage criteria, as well as single tenancy properties.
What should you consider as a buy-to-let investor?
There are some common mistakes that buy-to-let landlords make, particularly if they are unfamiliar with buy-to let mortgage criteria.
Familiarising yourself with the legislation around being a landlord and your responsibilities towards your tenants is also an essential part of investing in buy-to-let property. Finding the right tenants and ensuring that they are happy in their tenancy can make your investment far more straightforward.
You also need to consider your long-term financial planning and how this fits with a buy-to-let property. If you intend to pay a lump sum in the future, check that this is included in your buy-to-let lending criteria to avoid incurring penalties.
Find out more about our Buy-to-Let service or how the Real Estate Finance team at Arbuthnot Latham can help you.
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