The Revolution Finance buy-to-let team receive lots of enquiries from prospective new investors.
Online mortgage comparison sites and online applications are one way to secure lending, and many new investors complete the process but come unstuck when they experience limitations or unsuccessful results.
We advise against using online applications for a buy-to-let mortgage because:
- They are restricted in which lenders they show you.
- There is no verification process to check which lenders you may quality for.
- Your circumstances are not considered, which may have a significant impact on the best funding route for you.
A standard part of the property investment process is to seek an Agreement in Principle (AIP); this is an indicative offer of lending that shows you the amount of borrowing you may receive, against which terms and at what interest rate.
Here we'll explore AIPs in a little more detail, to help you on the journey to securing lending for your next investment property.
What is the Best Way to Get a Mortgage Quote for a Buy-to-let Property?
The amount of lending you can secure, and the interest rates you will be offered, depend on several factors such as:
- The lender's eligibility criteria.
- Your projected rental income.
Since every property is different and every landlord has a different set of circumstances, the optimal way to secure a quote for a mortgage is to use an experienced broker.
Brokers have access to the whole of the market so we can negotiate the very best deals, taking your circumstances and requirements into consideration before recommending the lenders we know will be most suitable.
This also ensures that you don't end up spending money on unsuccessful applications or rack up marks on your credit file by applying online to lenders whose criteria you do not meet.
Do Online BTL Mortgage Applications Work?
Applying online, or making an enquiry online, is often a quick way to start investigating your options for borrowing against an investment property.
Revolution Brokers are fully equipped to carry out digital applications, to save you time, and make the process as streamlined as possible.
Why is a Buy-to-let Agreement in Principle Important?
A BTL agreement in principle is delivered in the form of a statement from your lender to say that they will consider lending to you against your proposed investment property, based on the information you have provided.
To obtain an AIP, get in touch with Revolution Finance Brokers, and we will ask for a quick set of information about you and the property you wish to buy.
You will usually receive an AIP within 1-2 days. Typically the offer stands for around 60-90 days and will be dependent on other information that won't have been covered in-depth at the AIP stage.
We use the details you provide us with to check your credit file, which helps us determine which lenders will be most likely to extend a lending offer to you.
An AIP isn't essential but is a reassurance that you will be able to move ahead with your rental property purchase.
Please note than an AIP is not a formal mortgage offer, but an offer 'in principle' that the lender will extend you an offer provided other conditions are met.
What are the Advantages of Having a Buy-to-let AIP?
Having an AIP is a useful negotiating tool since it shows that you are likely to be able to move ahead quickly with a property purchase.
If an investment property is under competition from buyers, having an AIP ensures that you make a credible option.
An AIP is also useful if you have any bad credit history; since it provides the reassurance that you will be able to secure lending.
Credit checks are part of the AIP process, with your permission. These usually constitute soft checks, which do not leave any marks on your credit file.
Are there any Disadvantages to Securing a BTL Agreement in Principle?
There can be - it's always important to remember that an AIP isn't a guaranteed offer of lending.
It can be that you have an AIP, but when you come to complete the application, some of the details about the property or your circumstances mean that the lender cannot make a formal offer to lend you a mortgage.
This can be extremely frustrating.
It is essential to work with a respected mortgage broker who will take steps to protect your credit file from unnecessary marks. Some lenders use a 'hard credit check' before extending an AIP, which does leave a record and can harm your credit rating.
Particularly if you apply to multiple mortgage lenders at once, have several marks on your credit file from AIP searches, and then are not able to secure mortgage lending, it can have a severe impact.
Revolution Finance Brokers understand the importance of protecting your credit rating, and will always advise what sort of checks are required to secure an AIP.
We also recommend the most suitable lenders right from the start, to avoid making multiple applications, with multiple credit checks, to lenders that we know are not right for you.
How Can I Get an AIP for a Buy To Let Mortgage?
The fastest way to obtain an AIP is to give us a call on 0330 304 3040 or drop us a message at email@example.com.
Most mortgage lenders will require a form to be filled in, which asks some questions about your information, and what you wish to borrow.
Can Revolution Brokers Manage my BTL Mortgage Application?
We certainly can; the process usually works like this:
- Our BTL mortgage team discusses your circumstances and asks for some details about your requirements.
- We approach the market to find the most competitive deals and options to suit you.
- Revolution recommends the most advantageous lenders, and work with you to apply for an AIP on your behalf.
- Once you're ready to proceed, we progress to a full application process along with property valuations.
- Your application is underwritten by the lender, alongside the valuation report to verify the value of the investment property.
- We receive a formal mortgage offer, and you can move on to exchanging contracts and completing your purchase.
The Revolution team are always flexible and work around your schedule so that you can get your investment mortgage secured most conveniently.
Do I Need any Paperwork for a BTL Mortgage AIP Application?
We'll always advise on what information you need; initially, this is just information such as your personal details, and an overview of your income and outgoings.
Later on, you'll need proof of income, but we work through the process one step at a time.
You will need to be able to verify your identity before any checks are carried out, or applications are made; the most typical documents include:
- Photo ID: passport, driving license or a national ID card.
- Proof of address: bank statements or a council tax bill.
- Proof of income: payslips or accounts.
- Proof of outgoings: bank statements.
- Portfolio details: for landlords with multiple rental properties.
Which are the Most Important Factors in BTL Mortgage Quotes?
Affordability is always important. Lenders have to ensure that you can keep up with repayments, to minimise any risk to them.
Usually, you will need a higher deposit than for a residential property, often around 25%, although this all depends on the anticipated revenue the property will generate.
Most lenders would like to see an anticipated rental income of 125% of the monthly mortgage repayments, and up to 160% for the highest rate taxpayers.
Other relevant considerations are:
- Whether you are an experienced landlord or first-time investor: first-time landlords are best advised to work with specialist lenders who will be happy to consider their application.
- Whether you own your own residential home - many lenders require you to own your own property and to have done so for at least six months.
- Your employment status - self-employment is seen as less stable than full-time PAYE employment. Contractors are self-employed applicants will usually need to provide a year's worth of accounts to apply for a BTL mortgage.
- Whether you have any bad credit history. This doesn't mean that you cannot secure an investment mortgage but does mean that you are strongly advised to work with a broker to avoid making unsuccessful applications and racking up more marks on your credit file.
- Whether the property is non-standard - i.e. it has a thatched roof or a timber frame. Traditional residential brick and mortar buildings are the lowest risk proposition for a BTL mortgage provider.
Remember that working with a broker can mitigate any of these issues; we discuss your specific circumstances before any applications are made, to enable us to recommend the right lenders and the most advantageous deals on the market.
BTL Mortgages as a Limited Company vs as an Individual
Increasingly, landlords are looking at limited company structures as a viable way to secure mortgage lending to expand their property portfolio, or to purchase their first rental property.
Typically, lenders don't offer as competitive rates to limited companies, but there are many other plus points.
Taxation rates mean that mortgaging a buy-to-let through limited company ownership may be more profitable. It may also be more accessible to secure lending as a company than as an individual, particularly if you have experienced any credit issues in the past.
Borrowing Criteria for Limited Company Landlords
The lending criteria remain similar to those for individual landlords, but you will need to provide information about:
- Your existing property portfolio if applicable - both personally and as a company.
- The company ownership structure and directors (some lenders have a limit on the number of directors considered acceptable).
Professional Support with Buy-to-let Agreements in Principle
If you have any queries that haven't been covered in our guide or need tailored support with your buy-to-let Agreement in Principle, get in touch with Revolution Finance Brokers today on 0330 304 3040 or drop us a message at firstname.lastname@example.org.
Our team are specialists in investment property lending and will ensure you find the right lender, the right mortgage, and the right terms for you.