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How much can I borrow for a Buy to Let mortgage?

Shaw Gibbs Financial Services Ltd offers independent advice on all types of BTL mortgages.

How much can I borrow?

It is possible, subject to sufficient rental income, to borrow up to 85% Loan to Value (LTV) currently with a number of lenders. Competitive interest rates are available up to 75% LTV and this is more realistic perhaps for most properties. Under 60% LTV is where you will find the lowest interest rate deals.

First Time Landlords

As a first time landlord most lenders will expect you to own your home, but this is not a requirement of all. You will be expected to earn between £20,000 and £30,000 to demonstrate that you have the ability to cover void periods.

Pay rate calculations

All lenders will assess the affordability of a BTL property to ensure that the rent covers the mortgage payments sufficiently. Following recent changes in legislation, the mortgage payment must be covered at a rate of 145% at a certain reference interest rate, typically 5.5%. However, some lenders use different percentages for remortgages and others allow for your own income when assessing maximum loans. Consequently, it is important to seek advice for how much you can borrow.

Example: £250,000 property, let for £1,000 gross PCM

How much can I borrow, assuming a 5.5% reference rate?

(1,000 /1.45) x 12 = £8,275 annual interest max

(8,275/5.5) x 100 = £150,455 maximum loan

Expanding your portfolio

Many lenders have limits on either how many BTL properties you can mortgage with them or how many BTL properties you can mortgage in total. This means it can become increasingly difficult to obtain further BTL mortgages as your portfolio expands.

We can arrange capital raising remortgages to release equity from your existing properties which can form the deposit for your next investment property. In a competitive market it is often preferable to purchase a property with cash. We can arrange “day 1” remortgages for home improvements or to release cash from the property for further purchases.

Houses of Multiple Occupancy (HMO)

In Oxford, a property must have a HMO licence if 3 or more people live there. Fewer lenders now offer HMO mortgages and those that do charge for the privilege and have higher rates and product fees.

Fortunately not all take this view and it is key to know what each lender classifies as an HMO. Lender Limits can be related to the number of bedrooms or occupants, varying between 3 and 5.

Types of Tenant and Tenancy

Lenders have different views on what is acceptable in terms of how a property is let and to whom. Lenders typically prefer a tenancy agreement to be on a short term, 6 to 12 months. However longer lets of up to 3 years can be accepted by some.

Single Assured Shorthold Tenancy (AST) family lets, multi- student lets and corporate lets are all acceptable, however if you wish to let your property on a long term corporate let you will have a limited number of lenders that can be approached.

Retirement Portfolio

It is common now for clients to think of their investment properties as an additional source of retirement income. But what happens at the end of an interest only mortgage term?

As the original loan is still outstanding often the property must be sold to repay the debt. But with planning it is possible to arrange your mortgages to run to age 85 or 90. It is key that this is not left too late to arrange as many lenders have upper age limits on application of 70/75.

You may be surprised that it is possible to arrange remortgages or purchases with free valuations, conveyancing or cash back payments.

If you would like independent advice please contact our Financial Services team on +44(0)1865 292 200.

Your home may be repossessed if you do not keep up repayments on your mortgages. There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £495.

The Financial Conduct Authority does not regulate some forms of buy to lets, corporate finance or tax advice.

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If you would like independent advice please contact our Financial Services team on +44(0)1865 292 200



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