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Buy to let 80% LTV Mortgages
It's no secret that buy to let mortgages usually have a higher deposit requirement - and, therefore, a lower Loan to Value (LTV) limit.
That's because a buy-to-let mortgage is inherently riskier for a lender than a residential loan. If you're buying a property to live in, you can get a mortgage with as little as a 5% deposit (ordinarily through a guarantee scheme) but will need at least a 20% deposit for an investment acquisition.
In this guide, the mortgage Brokers team explains all the ins and outs of getting an 80% LTV mortgage on a buy-to-let and the application criteria your lender will likely assess when deciding whether to approve your application.
For more information about the best buy-to-let mortgages at 80% LTV, please give us a call!
Choosing the Best Buy-to-let Mortgage 80 LTV
Purchasing an investment property with a 20% deposit puts you in a relatively stable position. Of course, that all depends on your circumstances, which we'll explain in a bit more detail shortly.
However, suppose you're an experienced landlord with a good credit score and can demonstrate affordability.
In that case, there are several competitive lenders out there who will consider an applicant at 80% LTV.
The key to remember is that an investment mortgage is always interest-only, except in very unusual circumstances. Lenders look at the projected rental income as the primary measure of affordability.
Therefore, you have more choices if you have a 20% deposit, and your rental income will comfortably cover the monthly interest.
Our advice is always to consult a professional buy-to-let broker.
Many of our exclusive deals offer extremely attractive interest rates and are far more beneficial for professional landlords than any product you'll find on the open market!
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What Are the Eligibility Criteria For the Best 80 LTV Buy-to-let Mortgages?
So, we've mentioned eligibility, and you must understand how this works. Each lender has policies and rules about who they will lend to - and those policies vary wildly between lenders.
For example, one bank might loan only to individuals who will be under 75 at the end of the mortgage term, even if that's a standard length 25-year mortgage.
Other niche lenders have no upper age limit and will happily lend to retired landlords with sufficient capital to pass the affordability checks.
As a rough guide, most 80% LTV buy-to-let mortgage lenders will look for:
- Rental income that exceeds the interest charge by at least 125%
- A minimum annual revenue, often starting from £25,000.
- Good credit score and history - many banks have a nominal 'pass mark', but a specialist lender won't always rely on this to decide.
If you've been automatically turned down, likely, you don't meet one of these essential eligibility criteria.
However, it's worth reiterating that these are only general terms and don't apply across the buy-to-let lending sector.
As whole-of-market brokers, Revolution can negotiate great deals on your behalf with lenders that take a flexible view, so do get in touch if you're concerned about being rejected for a buy-to-let mortgage.
Why Does My Tax Bracket Matter on an 80 LTV Buy-to-let Mortgage Calculator?
As a landlord, your tax bracket matters because a lender needs to be confident you can afford to keep up with the interest-only mortgage payments.
You might use an 80 LTV buy-to-let mortgage calculator and be asked about your tax bracket, and here's why:
- If you pay basic rate tax, you pay 20% of your profit. The lender will want to see a projected rental income of 125% of the mortgage interest. For example, a mortgage costing £800 per month needs rent of £1,000 to be affordable.
- Taxpayers in the higher rate bracket earn less profit from their rent due to their higher tax, and so a lender will want to see rent of 145% of the mortgage interest. E.g. a mortgage costing £800 a month needs to demonstrate £1,160 a month rental income to qualify.
- This factor increases again for additional rate taxpayers, who need to prove that the rent will be 160% of their interest - your same £800 mortgage needs to generate £1,280 in monthly rental income.
Most lenders will also use a stress test to make sure they are lending responsibly.
Ordinarily, that means calculating the monthly interest at a nominal 5% rate and applying the same affordability analysis to ensure the payments are suitably covered.
An 80% LTV is reasonable, and you'll find more lenders offering to buy-to-let mortgages at this deposit level than if you have a lower down payment.
However, limited deposits can restrict your options and mean it's more likely you'll be turned down by a mainstream lender who applies strict affordability criteria to their lending.
Get in touch with Revolution if you're struggling to secure a buy-to-let mortgage at 75% LTV or 80% LTV, and we'll advise on the independent lenders who are best placed to approve your application.
Buy-to-let mortgages are a similar product in principle to residential mortgaging, but the application assessment and repayment basis are likely to be very different.
Customarily, a residential mortgage is paid on a repayment basis, with a capital element plus interest paid each month against an outstanding reducing balance.
Buy-to-let lending is usually interest only, so you'll need an exit strategy to demonstrate how you will repay the original amount borrowed at the end of the term.
This strategy is regularly to sell or remortgage the investment property.
An 80% LTV buy-to-let mortgage means that you're offering a deposit of 20% against the total purchase cost of the property.
Some lenders will be happy with this relatively high LTV for an investment mortgage, provided you don't have any other risk factors such as bad credit or a lack of experience in the rental market.
However, other niche lenders will consider a broader range of circumstances, so you might not need to increase your deposit value to secure approval.
That said, you will pay less interest the higher a deposit you can offer, so there is merit in applying for a lower LTV where possible.
If you own a residential property that you live in with a mortgage, you'll need consent from your lender to switch this into a rental home.
It isn't unusual to choose to retain property as a rental investment when you move on, but you do need to consult your lender.
Failure to inform them of the change of use may constitute a breach of your mortgage contract, and you cannot use a homeowner loan to purchase a buy-to-let asset.
Again, it's all dependent on the lender. Some will happily grant consent to let, whereas others won't, often because they don't offer buy-to-let mortgage products.
Give Revolution a call if you've been turned down for consent to let, and we'll advise on alternative mortgage solutions to replace your current residential loan with a specific buy-to-let product.
Generally, high street lenders implement an age gap, typically between 70 and 80. New applicants must be within this age cap when the mortgage term is due to end to qualify for a mortgage.
If you're applying for a high LTV buy-to-let mortgage, you might need to comply with an age limit, but note that this does not apply to all lenders!
Revolution works with clients of all ages with years of property investment experience who fall beyond the nominal age limits applied by some lenders.
A commercial buy-to-let mortgage may be suitable if you're purchasing business premises to let or are buying an investment property as a rental company.
If you can offer up security, such as director's guarantees, you have a good chance of securing a business buy-to-let mortgage with a 20% deposit.
Note that this is still a lower deposit than most lenders will require, but there are ways to use the business as security to reduce the lender's risk, such as offering a floating charge over the business assets.
Typically, a buy-to-let mortgage as an investment loan falls outside the scope of the FCA, so they aren't regulated as a residential home loan.
However, unregulated means that the products are often more flexible and don't fall under more rigorous eligibility criteria that are mandatory for residential lending.
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.