• Just How Easy Is It To Secure a Buy to Let Mortgage?

  Filed under Articles
  Dec 8

  The buy to let market is booming; there is no denying the fact but this doesn’t mean to say that buy to let mortgage providers are chomping at the bit to lend hundreds of thousands of pounds to every wannabe private landlord that applies. Since the credit crunch began in the summer of 2007 it has been quite difficult to secure buy to let mortgages, but thankfully mortgage providers are now starting to relax the qualifying criteria.

  Deposit Amounts

  Buy to let mortgages have always required a much larger deposit than similarly sized residential mortgages, but recently the amounts have started to come down to a reasonable level. A lot of mortgage providers do still expect 40% of the purchase price in the form of a deposit but some have relented somewhat and will now accept anywhere between 20% and 40%.

  To secure a buy to let mortgage that requires a 20% or 25% deposit you’ll probably need to show that you, personally, have the means to pay the monthly mortgage payments should your rental property stand empty. To do this you will need to supply proof of your annual income even though this information isn’t generally taken into account when buy to let mortgage applications are considered. If you have a healthy annual income (not including the rental income you intend to earn from the property in question and you are willing to use it as a form of collateral, so to speak, then you are much more likely to have your buy to let mortgage application approved with a lower deposit amount.

  Rental Income vs. Mortgage Payment Amount

  Until the qualifying criteria started to change recently it was the norm for buy to let mortgage providers to insist on a rental income equal to at least 125% of the monthly mortgage payment. So for example, a mortgage with a monthly payment of £800 per month would only be approved if the property in question could realise a monthly rental income of at least £1000. Again, because your personal income can now be taken into account, you may still be approved with a rental income of only 110% of the mortgage payment. This is obviously a bit more risky for you i.e. if rental amounts drop or interest rates rise, but it can be a means of getting that all-important approval for your first buy to let mortgage.

  Standard Mortgage Deals

  To make things a bit easier for first time landlords, a lot of mortgage providers now offer a range of mortgage deals with differing interest rates and arrangement fees. According to recent figures standard buy to let mortgage deals (no discounted period and a fixed interest rate) are slightly easier to get approved for than discounted deals.

  It seems that the underwriters of buy to let mortgages are happier to approve mortgages with fixed monthly payments than they are those with variable ones. Obviously they assume it is easier for landlords to budget if they know the exact payment amount required each month, and as such by opting for a fixed rate mortgage it can be slightly easier to get approval (it must be said this is not always the case though).

  So just how easy is it to get approval?

  Going back to the original question, it is harder to get approval for a buy to let mortgage today than it was during the golden decade 1997 to 2007 – just before the credit crunch hit. However, saying this, it has definitely gotten easier over the last 12 months because mortgage providers can see that the buy to let market is still an attractive investment even with the current economy.

  The number of mortgage providers that now offer buy to let mortgage deals has increased dramatically over the last 12 months, and as a result upwards of 35,000 buy to let mortgages are being approved each month. So, providing you meet the standard criteria for a mortgage and you can supply a large enough deposit there is no reason why you can’t get approval for a buy to let mortgage.

  Tagged as: buy to let, buy to let mortgage, buy to let mortgages
  
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