It goes without saying that no one would venture into buy to let property purchases without savings in the bank to cover repairs and void periods. Yet according to many UK mortgage providers, this is what lenders believe many are trying to do.
The majority of lenders will want to see additional income to support a buy to let application in the form of PAYE of self-employment. And this income has to be separate from rental yield. This blanket approach to mortgage applications could be hurting the sector and preventing some people from investing in property.
If a mortgage payment on a property is just £350 yet the property brings in £1000 every month, the landlord has access to reserves which can be put towards repairs and to cover void periods.
It’s hard to imagine a landlord doing this any other way, or taking on a mortgage that is barely covered by the rental payments. Before making the investment, every landlord will weigh up the cost of the investment versus the potential returns. However, many lenders are still reluctant to take on borrowers who plan to cover their mortgage payments and repairs with rental income alone.
While not widely advertised, there are lenders willing to work with borrowers in this situation. This type of lending product does not rely on additional income, so it can be used by those on fixed income such as retired individuals. It’s open to anyone ages 21-70 provided you have owned at least one rental property before. It has to have been rented out in the last 6 months, so this would not be suitable for first time landlords.
The deposit can be as little as 20%, but as with all mortgages, the more deposit you can provide the better the rates will be. Your income can be from any role, even if you have just started the job. It can also be from retirement income, which is a great way to supplement your income at a time when saving rates are so low.
The rental yield is important for this type of mortgage. Lenders will want to see that the rental yield will cover 125% of the mortgage. So, if your mortgage is £1000 per month, you need to rent out the property at £1250 per month. This rule will depend on the loan to value, so the lender may be more flexible if you are asking for a smaller LTV.
To find out how you can make the most of buy to let mortgages with no minimum income requirement, get in touch with Niche Mortgage Info today. We can provide advice and support to guide you through the application process. We also offer extensive guides to help you understand your position.