Are you looking to purchase a property to rent out but don't have the funds for a large down payment? You may be wondering if it's possible to get a buy-to-let mortgage with a 10% deposit. The short answer is no, the minimum deposit required by specialized lenders is 15%. You'll need a buy-to-rent mortgage if you intend to take out a loan to buy a property you want to rent; traditional residential mortgages are only for those who intend to live in the property they're buying. Mortgage lenders don't accept properties rented in a standard residential mortgage. This is because they believe that purchase-to-rent loans carry greater risk than standard residential loans.
Today, the best purchase-to-rent mortgage rates are available on mortgages with a higher deposit, such as 35%, or with a loan-to-value ratio of less than 65%. There is little difference in rates and fees between fixed and variable purchase-to-rent mortgages with an LTV of up to 75%. However, if you have a purchase-to-rent mortgage with an 80% LTV, rates vary and discounted variable rates are lower than fixed-rate alternatives. Our service is completely free and you don't need to share any personal data to access our comparison tables. As shown in the table below, while it is possible to obtain a loan with a 15% deposit, very few lenders offer these products, and first-time buyers have far fewer options than current homeowners.
Because lenders who are willing to accept a 15% deposit are more difficult to obtain than regular buy-to-rent mortgages, you might want to contact a mortgage broker or independent financial advisor.
What Are the Risks of Taking Out a Buy-to-Let Mortgage?There will almost certainly be “gaps” when the property is unoccupied or rent is not paid, and you'll need a financial “cushion” to meet your mortgage payments. Homeowners can no longer distribute the capital in their portfolio, and lenders will not grant a purchase-to-rent mortgage if the landlord has a property that is not profitable. However, it's always ideal to work with a mortgage broker who can support your application, negotiate rates and terms on your behalf, and identify the best lenders to apply to. Once you end your interest-only mortgage agreement, you are expected to pay the cost of the property at the time you purchased it. There are some key differences between purchase-to-rent mortgages and ordinary mortgages that could make it difficult to buy a property for rental purposes.
Expert brokers can also access offers that automatically switch to a purchase-to-rent mortgage once the bridge loan has been repaid. You'll also want to look at the additional features of a purchase-to-rent mortgage, such as the incentives offered, the early repayment fees, and whether there is the possibility of overpayments (or something similar). YOUR BUY-TO-RENT PROPERTY CAN BE FORECLOSED IF YOU FAIL TO MAKE PAYMENTS ON ANY SECURED MORTGAGE ON IT.
How Can I Get Approved for a Buy-to-Let Mortgage?If you're ready to apply for a mortgage, talk to a Revolution broker to see what options are available. For example, a grandparent or parent may decide to sell a property to an adult child or grandchild at a discount, which in practice becomes a deposit that the lender accepts to apply for a purchase-to-rent mortgage.
Before giving you a low-deposit mortgage, the lender will likely consider the following (along with other factors).
- Your credit score
- Your income
- Your current debt load
- The rental income potential of the property