When it comes to buy-to-let mortgages, the amount you can borrow depends on the rental income you expect to receive from tenants. Most lenders require rental income to be at least 125% to 145% of the interest repayments on a purchase-to-rent mortgage. This means that if your monthly interest payments are 600 pounds sterling, you'll have to charge at least 750 pounds a month in rent. In general, the more you can charge in rent, the greater the loan you might be eligible for. In addition, most lenders don't offer purchase-to-rent mortgages greater than an 80% loan-to-value (LTV) ratio.
This means that you'll need a larger deposit to get a purchase-to-rent mortgage. This is usually a minimum of 25% of the total value of the property, although this may vary depending on the lender and the type of mortgage. Sometimes you can pay a minimum deposit of 20% for a purchase-to-rent mortgage, although some of the best mortgage rates available require a deposit of up to 40%. Other fees also tend to be higher when taking out purchase-to-rent mortgages. Processing fees can reach 3.5% of the value of the property.
If the rental valuation of the property is not high enough, the loan-to-value ratio (LTV) required by the lender could be affected, meaning that you'll need an even larger deposit. Unfortunately, due to industry terminology, many people misunderstand that no income is needed to buy to rent mortgages. However, this is not true and lenders will always look at your rental income when considering your application. If you're looking to take out a buy-to-let mortgage, it's important to understand how much salary you need in order to qualify for one. Knowing this information will help you make an informed decision about whether or not this type of mortgage is right for you.
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