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Qualifying for a Mortgage on Rental Income

Are you a professional landlord and receive the bulk of your earnings through rental income? Here we'll explain how this affects your mortgage application and the best ways to find a competitive mortgage deal designed for self-employed or corporate rental property landlords.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-15
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Can I Qualify For A Mortgage With a Rental Income?

Many self-employed landlords look for mortgages based on their rental income, and this can be challenging with a mainstream provider who isn't familiar with lending to professional landlords.

Fortunately, there are plenty of options available, and we'll run through how the process works here.

For more information about mortgage applications for landlords, give us a call on 0330 304 3040 or send a message to [email protected].

Can I Get a Mortgage Based on my Rental Income?

You can, although most lenders will need to see three years of stable income levels. You must verify this income through your tax returns or accounts.

Usually, rental income is suitable for residential or buy to let property mortgages. However, lenders will have different criteria for each mortgage product.

On residential applications, a lender might ask for rental income verification. For buy to let investments, the property's anticipated rental returns are more of a primary factor.

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How Can I Verify my Rental Income for a Mortgage Application?

For any self-employed mortgage, a lender will need some proof of income. In general, you will need self-employed accounts for at least three years. Lenders don't tend to accept tenancy agreements as evidence that the income has been received.

Some flexible lenders offer landlord mortgages with just one or two year's worth of accounts, although this is less common.

Rental income is considered a little riskier because:

  • Lenders must check your affordability and ensure they lend responsibly.
  • Rental income can be variable and relies on tenants keeping up to date and having a tenant in place all of the time.

How Do Affordability Checks Work on Rental Income Mortgages?

Most lenders will take an average annual income over two or three years. This average is used to calculate your average earnings and is the figure used in the affordability assessment.

Some providers will include 100% of rental income in their sums, whereas others will only include 50% or 60% of this revenue stream to offset the risk that the property becomes vacant.

The income figure is usually taken as the declared profit on your tax return.

What Rental Income Do I Need to Apply for a Buy to Let Mortgage?

Buy to let mortgage applications work a little differently. Lenders will need to see that the rent achieved covers at least 125% of the mortgage payment each month and 145% if you are in a higher tax band.

Other options to finance a buy to let property investment include:

  • Refinancing existing portfolio properties. You can apply for a buy to let remortgage or a second charge on an investment property and use the funds to pay for a new investment. Most lenders will offer a remortgage of up to 75% of the value and up to 80% or even 85% in some circumstances.
  • Joint mortgages are another option for professional landlords looking to buy a residential property. If you purchase with a partner, family member or friend who is employed, this makes your application easier to approve than based on rental income alone.
  • Short-term financing is more expensive but might be an option if you cannot demonstrate affordability from your rental income. A bridging loan could be viable if you want to purchase a new rental property quickly, for example.

Can I Get a Mortgage if My Rental Income is Lower than the Monthly Mortgage Cost?

If you find that your rental income drops or doesn't cover the mortgage, you will need to reconsider the borrowing terms.

You might decide to:

  • Apply for a longer term to bring down the monthly interest cost.
  • Transfer to a lower-cost product or more competitive deal.

Are There Commercial Mortgages Available for Landlords?

Possibly, yes. If you rent out a commercial property and would like a new mortgage to expand your investment portfolio, then the existing rental income can be used in the affordability assessment.

In most cases, the buy to let property you already own will need to be in the same name as the new mortgage application.

How Much Mortgage Interest Tax is Payable Against Revenue from Rent?

As of the last tax year, you cannot claim tax relief against mortgage interest as a buy to let landlord.

Expert Advice with Mortgages for Landlords

If you're looking for low-interest rates on a landlord mortgage, or have been turned down by your usual lender, give the mortgage advisors team a call.

We are independent, whole-of-market brokers with expertise in the lending sector for applicants reliant on rental income. Call the team on 0330 304 3040, or drop a message to [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

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.

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