What lenders look for in a Buy to Let mortgage application

How rental income affects your application

The achievable rental income is a significant factor in Buy to Let mortgage application success. Lenders want assurance that landlords will be able to afford mortgage payments in situations such as voids between tenants.

Lenders will instruct a valuer to review local rental market data to calculate projected rental income to assess whether it is sufficient to cover the mortgage payment. If the rental income is not sufficient, the mortgage will not usually be approved, even if the applicant has a high personal income.

Impact of property type on approval

While the property type requirements can vary across different lenders, from our experience, lenders generally use stricter stress tests for higher risk properties like HMOs. Lenders also review the experience of the landlord when assessing mortgage applications for HMOs and studio flats.

Credit history requirements for landlords

Landlords with adverse credit history will usually have less Buy to Let mortgage deal options. Many of the lenders we work with will approve mortgages for applicants with minor credit issues such as 1 or 2 missed payments over the period of a year. More serious issues like CCJs and bankruptcy will generally mean fewer choices of lenders, higher mortgage rates and may require a larger deposit.

Borrower financial standing and affordability checks

Buy to Let mortgage affordability checks focus more on rental income than salary. A good rental income to mortgage payment ratio (Interest Coverage Ratio) gives lenders more security against the loan, as the total annual rent income should cover unexpected costs such as voids.

However, they will also review credit history and financial commitments if you apply in your individual name rather than under a limited company structure.

Looking for advice on Buy to Let mortgages?

At James Leighton Financial Services, our mortgage brokers  work with property investors and landlords operating as limited companies or as individual applicants. Contact our team to speak to a qualified mortgage adviser who has experience in helping investors to get started in property investment and in expanding property portfolios.