The buy-to-let phenomenon took off perhaps 20 years ago and those who invested at that time will have experienced huge returns on their original investment. The availability of buy-to-let mortgages has allowed the masses to invest in property in a way which was only available to the very wealthy previously.

How Does A Buy-To-Let Mortgage Work?

Essentially, the difference between a residential mortgage and a buy-to-let mortgage is that with the former, the lender is concerned about the borrower’s personal income as this will be used to pay the loan; with buy-to-let mortgages, the lender is concerned about the level of rental income that the property itself can generate.

Different lenders require different levels of rental income when deciding on whether to lend or not. Typically, a lender will want to know that the achievable monthly income is at least 145% of the monthly mortgage, based on a rate of 5.5%. However, as with residential mortgages, different companies will amend this calculation depending on their appetite to lend money in different scenarios.

Portfolio Landlords

Regulatory changes a few years ago affected the way that portfolio landlords must now be assessed when applying for further lending. This refers to individuals with four or more properties. The underwriters must now consider the overall portfolio, not just the property upon which finance is being sought. Understandably, this has caused some consternation amongst some of our larger property investor clients. However, every lender interprets the rules in their own way. As we understand more about how each lender views a portfolio, it is becoming easier to place cases with the most appropriate organisation. We have already successfully processed re-finance cases for a number of our portfolio landlord clients.