If you don't own your own home but you want to get into buy to let, there are only a few borrowing options, as Nick Helm, expert buy to let mortgage broker explains.
If you need a buy to let mortgage to become a residential property investor, most lenders prefer that you own your own home first. This is so that they feel more confident that you will actually rent out the BTL property rather than live in it yourself.
In the past, there have been instances of borrowers who were unable to get a home-buyer mortgage based on the multiples of their personal income, so instead have gone - illegally - down the buy to let route where the mortgage is largely based on the rental income of the property being purchased,
However, there are a few, and I mean less than a handful, of buy to let lenders that will consider lending to you as the primary applicant on a buy to let mortgage if you don't already own property (usually your home).
This is particularly useful for people living in rented accommodation or with their parents but who want to invest in buy to let. Largely, when underwriting, these lenders will assess both:
- Your earned income and use an income multiple in much the same way as if they were underwriting a residential mortgage application. This means that you should be able to borrow up to 4.5 times income.
- The income generated from the rent of the property being purchased to make sure that it fits their Interest Cover Ratio (ICR).
In addition to proof of identity and address, they will also want to see:
- If employed - the applicant's last three-months' payslips and P60 or latest
- If self-employed - latest 1-2 years' SA302 Tax Calculation plus the Tax Year Overview
- Last three months' bank statements showing day-to-day expenditure and personal income
You may be surprised to know that these lenders do not add a premium - rates are the same as those offered to home-owners and experienced landlords, with loans of up to 75% of the purchase price or valuation (known as loan to value/LTV). And there are options for both personal and limited company borrowing.
If you're content to be a secondary applicant - there are even more lenders available as long as the primary applicant is a property owner.
Next steps for first time buyers and landlords
Just pick up the phone 01732 471608 or email me email@example.com to discuss your proposition and see if there is a buy to let mortgage that fits your requirements. We look forward to helping.