If you are new to buying a property, you may be wondering how to get a new buy to let mortgage. Securing the right mortgage is a crucial first step in becoming a successful landlord.
What Is a Buy to Let Mortgage?
A buy to let mortgage is a mortgage taken out on a property by a person or a company that plans to use the property to produce an income. The property will be rented by a tenant, not lived in by the person buying the property.
Who Can Get a Buy to Let Mortgage?
Anyone can get a buy to let mortgage as long as the applicant and property type fit the lender’s criteria.
Steps to Get a New Buy to Let Mortgage
Assess your finances
Before you get a new buy to let mortgage, you will first need to review your current financial circumstances to ensure it is affordable, as most buy to let mortgages require a 25% deposit.
Your income is another important factor to consider, as you’ll need to be able to cover the mortgage payments during periods when you don’t have tenants renting the property.
Research the Market
When choosing a property to purchase, you’ll want to consider both the property type and its location. You should also take into account:
- Rental demand in the area
- Local amenities and transport links
- Potential rental yield
Lenders will also consider these factors when deciding whether or not they’re willing to lend on the property.
Check Affordability Criteria
Mortgage lenders will use something called a rental coverage ratio, which is the rate at which the rental income must relate to the mortgage payment. This is usually between 125% and 145%.
For example, if your mortgage payment is £800 per month, the mortgage provider will want the property to show potential rental income of at least £1,000 to £1,160 per month.
Compare Buy to Let Mortgage Deals
To make sure you find the best mortgage deal, you can compare lenders rates using comparison websites. However, to ensure you’re getting the most accurate and up-to-date rate, it’s always best to speak with a mortgage adviser.
You’ll also need to choose the type of mortgage product you want, such as a fixed-rate or variable-rate mortgage, and whether you prefer an interest-only mortgage or a capital and interest mortgage. Again, a mortgage broker can help you decide which option is best suited to your individual circumstances.
Get a Mortgage in Principle
Once you’ve found a lender, you’ll need to apply for a Mortgage in Principle (MIP) through them. This provides an estimate of how much you can borrow. While it’s not a guarantee, it can strengthen your position when making offers on properties.
Submit the full mortgage application
When your offer has been accepted on the property you wish to buy, you should contact your lender or adviser and request that the full mortgage application be submitted. You will need to provide:
- Income documents (payslips or SA302s if self-employed)
- ID verification
- Bank statements
You will also need to find a conveyancer to handle the legal side of the purchase, unless your mortgage provider includes this service for free.
Get Approved and Complete the Purchase
Once the mortgage has been approved and the offer issued, the conveyancers will provide you with a completion date, this is when you’ll receive the keys to your property.
Tips for First-Time Landlords
Start Small: Begin with one property and learn the ropes before expanding.
Understand Tax Implications: Mortgage interest tax relief has changed, consult an accountant.
Factor in Costs: Consider letting agent fees, maintenance and insurance.
Common Buy to Let Mortgage Mistakes to Avoid
- Overestimating rental income
- Not budgeting for maintenance costs
- Forgetting about landlord responsibilities and legal requirements
- Choosing the wrong mortgage product
Final Thoughts
Knowing how to get a new buy to let mortgage is essential for any aspiring landlord.
No matter if your goal is passive income or growing a long-term portfolio, a well-informed strategy is key to maximizing your property investment.
FAQs
Can I get a buy to let mortgage as a first-time buyer?
Yes, it is possible but more challenging than if you are experienced. Some lenders require you to own a residential property first.
How much deposit do I need?
Most lenders require at least 20-25%, though some may offer options with as little as 15% for experienced landlords.
Is a buy to let mortgage interest-only?
Many landlords choose interest-only mortgages to reduce monthly costs, but you’ll need a plan to repay the capital at the end of the term, speak to a mortgage adviser to help you make the best decision.
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