If you work with an experienced broker, Buy to Let Mortgages have never been easier to obtain, whether you are a 1st time landlord, buying in a Ltd Company, adding to a portfolio of properties or sourcing an HMO (House of Multiple Occupation). However, in this changing market you need to be aware of constant changes to legislation, tax rules and lender stipulations and this is where Aspire Financial Services can add real value.
Buy to Let Mortgages can be a complex area which do require specialist mortgage advice. Lenders’ criteria will vary greatly:
- Interest Coverage Stress Testing,
- Maximum Age, Maximum LTV
- Maximum number of Properties that can be held
- Will they lend to a Ltd. Co? Many lenders will not.
These are just a few of the many factors that must be considered, and it’s where a specialist broker can help.
The minimum deposit required is 25% from many lenders although some will allow just 20%. If you are looking for competitive mainstream rates then 25% is the benchmark, as you will be charged much less competitive rates with a 20% deposit.
Most loans are taken out on an interest only basis, but repayment buy to let mortgages are also available. Note that it may be more difficult to meet the Interest Coverage as specified in the lender’s ICR criteria if you opt for a repayment mortgage.
There are several new pieces of legislation and lender criteria that can affect your Buy to Let plans.
- Energy–Efficiency rating of the house
- Room sizes in HMO
- ‘Portfolio Landlord’ status.
- Buy as an Individual or a Limited Company
You should speak to an experienced buy-to-let broker as part of your preparation before you plan which house to buy. We also work in partnership with a number of specialist property tax accountants that we can put you in touch with if you would like to understand the recent changes from HMRC and how these affect the return you can achieve.
Most lenders have a minimum income requirement of between £15,000 and £25,000 although some lenders require no minimum income.
- Affordability is based on the rental value. It must cover the Interest payments by an agreed interest rate, allowing for tax deductions. This is called the Interest Coverage Ratio (ICR)
- The ICR will vary from lender to lender
- The ICR is also affected by whether you are a normal or higher rate taxpayer, a limited company or a portfolio landlord.
As you will have realised, although Buy-to Let mortgages are more readily available, you should seek the advice of a broker to make sure that you don’t waste your time and avoid the pitfalls that can await. Speak to us at Aspire Financial Services for specialist help and advice.
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