If you’re thinking about investing in a buy-to-let property, one of the first things you’ll need to consider is how to finance the purchase. A buy-to-let mortgage is a popular option for many investors, as it allows you to borrow money specifically for the purpose of purchasing a rental property. However, the question many people ask is: is it hard to get a buy-to-let mortgage?
In this article, we’ll explore the factors that can influence your eligibility for a buy-to-let mortgage, and provide some tips to help you improve your chances of being approved. Here at Aventine Property, we offer buy-to-let in Leeds.
What is a buy-to-let mortgage?
Before we dive into the question of whether it’s hard to get a buy-to-let mortgage, let’s first clarify what a buy-to-let mortgage is. A buy-to-let mortgage is a type of mortgage that is specifically designed for people who want to invest in rental properties. Unlike a standard residential mortgage, which is based on the borrower’s personal income, a buy-to-let mortgage is based on the potential rental income from the property.
When applying for a buy-to-let mortgage, lenders will typically require a deposit of at least 25% of the property’s value. In addition, lenders will assess your eligibility based on a range of factors, including your credit history, your financial situation, and your rental income projections.
Factors that can influence your eligibility for a buy-to-let mortgage
- Credit history
Your credit history is one of the key factors that lenders will look at when assessing your eligibility for a buy-to-let mortgage. A good credit score is essential, as it demonstrates to the lender that you are a responsible borrower who is likely to make your payments on time.
If you have a poor credit history, it can be harder to get approved for a buy-to-let mortgage. However, this doesn’t necessarily mean that it’s impossible. Some lenders specialize in providing mortgages to people with poor credit, although the interest rates and fees may be higher.
- Rental income projections
As we mentioned earlier, buy-to-let mortgages are based on the potential rental income from the property. Lenders will typically require you to provide evidence of your rental income projections, such as a rental appraisal or a tenancy agreement.
If your rental income projections are low, this can make it harder to get approved for a buy-to-let mortgage. Lenders will want to ensure that you will be able to cover your mortgage repayments, even if your property is vacant for a period of time.
- Deposit size
Another factor that can influence your eligibility for a buy-to-let mortgage is the size of your deposit. Lenders will typically require a deposit of at least 25% of the property’s value, although some may require a larger deposit.
If you have a larger deposit, this can improve your chances of being approved for a buy-to-let mortgage. A larger deposit means that you are borrowing less money, which reduces the risk for the lender.
- Existing debt
If you have existing debt, such as credit card debt or personal loans, this can impact your eligibility for a buy-to-let mortgage. Lenders will want to ensure that you are not overextending yourself financially, and may be hesitant to lend you money if you have a high level of debt.
To improve your chances of being approved for a buy-to-let mortgage, it’s important to pay down your existing debt as much as possible before applying. This will demonstrate to the lender that you are a responsible borrower who is able to manage your finances effectively.
- Employment status
Finally, your employment status can also impact your eligibility for a buy-to-let mortgage. Lenders will want to ensure that you have a stable source of income. Read more about buy to let mortgage here.