Find out if you qualify for a BTL mortgage
Who exactly can apply for a buy-to-let mortgage? A lender will ask you to meet a range of criteria including:
- A minimum age, normally 18
- A maximum age, normally between 70 and 75 (some lenders will stretch higher than this)
- A minimum income of around £25,000 (some lenders don’t have this requirement)
- A successful credit check
- Property type
Are BTL mortgages difficult to get?
While the criteria for a buy-to-let mortgage might in some senses be stricter than for a residential mortgage, this doesn't mean that they’re harder to get.
Provided that you satisfy the lender's mortgage criteria and you have the deposit and paperwork in order, a buy-to-let mortgage can usually be arranged within three to six weeks. This is approximately the same amount of time it takes to process a residential mortgage.
The mortgage lender will assess whether you can afford the monthly repayments on your buy-to-let mortgage. However, there are some factors that you should also take into account before you go ahead with the application process.
The day-to-day costs of having a rental property can add up, so it's important to know what they are and to make sure you have money set aside to pay for them. These include:
- Letting agency fees
- Property maintenance costs
- Safety checks, such as gas and electrical
- Landlord's insurance
- Rental insurance
Changing your buy-to-let to a residential mortgage
If your situation changes and you need or choose to live in your buy-to-let property, then you’ll first need to inform your lender to confirm their rules around this. It’s worth seeking advice from a mortgage broker at this stage since you may find that securing a residential mortgage from another lender may work out more financially viable for you. If it’s not at this time, you’ll need to remortgage to a residential mortgage when you reach the end of your current deal.
Deciding to rent your existing residential property
Not everyone buys a property with the idea of renting it out to tenants. Many people end up doing so for a variety of reasons. You might decide to move into your partner's home leaving yours empty and ready to rent out, for example. You may want to keep your current home, using its rental income to finance purchasing another property. using the rent from your current home. Or you might need to move abroad, or you may even find it difficult to sell your home making you a landlord through no choice of your own.
If this is the case, and you decide to switch your residential home into a buy-to-let investment, you’ll need to take the correct measures:
1) Let your lender know
If you don't let your mortgage lender know that you've decided to rent out your property, then you could be breaching your loan agreement. You’ll need to apply for their consent which may lead to them increasing your interest rate and expect you to remortgage to a residential mortgage at the end of your current deal.
2) Inform your insurer
You'll need to secure landlord's insurance because standard domestic contents insurance won't cover your property if you're renting it out.
3) Speak to a letting agent
Letting agents are there to help you with the tasks involved in renting out your property. They can help you deal with all the legal and administrative aspects (which are significant) in addition to managing any maintenance that might need to be carried out.
4) Talk to a tax advisor or accountant
You'll need to be aware of the new tax implications that affect buy-to-let homes, such as increased stamp duty. In 2016 the stamp duty on buy-to-let properties was increased and is now 3% higher than on residential mortgages.