When it comes to buying a property to rent out, it's important to understand how much you can borrow and what the requirements are. Most lenders require a minimum deposit of 25%, meaning you'll need an LTV limit of at least 75%. The amount you can borrow is based on the monthly rent you can expect to receive from your property. Most lenders typically require 125% of your monthly interest payments in rental income, but this can sometimes reach 145%.If you already have a purchase-to-rent mortgage and want to borrow more money, talk to your lender and see if they allow you to do so.
Homeowners can no longer deduct mortgage interest from rental income to reduce the taxes they pay. It's worth talking to an experienced mortgage counselor to understand your options and get a good deal on your mortgage. Your lender will want to make sure that your property's rental income covers your mortgage payments, plus a little more. Consumer BTL mortgage counseling, organization, lending and management are covered by the same laws as residential mortgages and are regulated by the Financial Conduct Authority (FCA). That's because, from their perspective, a purchase-to-rent mortgage is much riskier than a residential mortgage.
These tend to be some of the most expensive mortgage offers offered, with the highest interest rates, so if you have an SVR it is advisable to find a better offer. Since most mortgages last 25 years, you'll normally need to be 45 years old or younger to be sure of getting a loan. When it comes time to pay off the cost of the property at the end of your interest-only mortgage agreement, it's important to consider the amount of rental income you expect to get from tenants who rent the property. This will be used to cover their monthly mortgage payments. It's also important to remember that there may be “gaps” when the property is unoccupied or rent is not paid, so you'll need a financial “cushion” in order to meet your mortgage payments.