It’s important to know that the way lenders work out how much you can borrow for a buy-to-let mortgage is different to how they do for residential mortgages.
In business terms, lenders look at buy-to-let mortgages as self-funding commercial business propositions.
And whilst they are similar to residential mortgages, they aren’t regulated under the Financial Conduct Authority (FCA) in the same way.
On a residential mortgage, your personal income will affect the amount that you can borrow, as that is what will be covering the mortgage repayments.
However, on a buy-to-let mortgage, it’s the rental income that you will receive from the property that determines how much you can borrow.
The maximum amount you can borrow for a buy-to-let mortgage varies, and depends on the amount of rental income that you expect to receive from your tenants.
As a rule of thumb, lenders will want the rental income to be around 25-30% higher than what you’re paying on the mortgage.
Remember, even though the rental income needs to exceed the monthly mortgage payments, you will need to put funds aside for ongoing costs and repairs such as maintenance, void periods and letting costs.
So, you should hold some of your money that you’re investing back, so you can use it as security against any unforeseen costs.
Entering the buy-to-let world can be overwhelming but our expert advisers will be able to talk you through every step, so contact one of them to get the ball rolling on your application.
Contact us today on 02380 642 018 or email@example.com.