Buy to let mortgages

Whether you're buying your first rental property or adding to a well established portfolio, the mortgage needs to fit the property, the rent and the way you own it. Small differences in lender criteria can change how much you may be able to borrow, so it pays to look across the market rather than going straight to one lender.

We're a mortgage and protection brokerage based in Leeds, with offices in Manchester and London, and we advise landlords across the UK by phone and video. Many landlords are also company directors or partners in professional firms, and we're used to looking at the rental income and the personal income together.

Most buy to let mortgages are not regulated by the Financial Conduct Authority.

How buy to let lenders assess rent

The main test for most buy to let lending is whether the expected rent covers the mortgage payment by a set margin, calculated at a stressed interest rate rather than the rate you'll actually pay. The margin varies by lender, by your tax position and by whether you buy personally or through a limited company.

That means the rent on a property, rather than your salary, often sets the ceiling on what a lender may offer. Some lenders allow your personal income to top up the rent calculation where the rent falls a little short. All buy to let lending is subject to underwriting and valuation, and the lender's valuer will confirm what they believe the property could achieve in rent.

Limited company buy to let mortgages

Many landlords now buy through a limited company set up specifically to hold property, often called a special purpose vehicle or SPV. Limited company buy to let is a well established part of the market, but lenders assess it differently from buying in your own name.

• The company structure. Most lenders prefer a company set up only to hold property, usually registered with a property letting SIC code. Fewer will lend to a trading company that also owns property.
• Personal guarantees. Lenders will usually want personal guarantees from the directors and major shareholders.
• Rent cover. The rent test is often more favourable for a limited company than for a higher rate taxpayer buying personally, although the margin and stressed rate vary by lender.
• Rates and fees. Limited company products can be priced differently from personal buy to let, so it is worth comparing both where the structure is still open.
• Moving existing properties. Transferring properties you already own into a company can have tax and legal costs. That is a question for your accountant and solicitor before we look at the mortgage.

Whether buying through a company suits you is mainly a tax question, so please speak to your accountant before deciding. Once you've decided on the structure, we'll find lenders whose criteria fit it. If you already own several companies or have a more complex setup, our article on owning more than one company may be useful.

Portfolio landlords

Once you have four or more mortgaged buy to let properties, most lenders treat you as a portfolio landlord. They'll look at the whole portfolio, not just the new purchase, and usually ask for a property schedule showing each property's value, mortgage balance and rent.

Lenders vary in how they view portfolio size, overall borrowing and how the rents across the portfolio stack up. A well prepared schedule and a clear explanation of your plans can make a real difference to how your case is received. If you're also renovating or building, we can look at development finance or auction finance alongside your term lending.

What you'll usually need

• Details of the property and the expected or current rent
• Proof of your deposit and where it has come from
• A property portfolio schedule if you already own rental properties
• Your own income evidence where the lender requires it
• Company documents, such as the certificate of incorporation, for limited company purchases
• Recent personal bank statements, and company statements where relevant

How we work with landlords

1. A proper conversation. We talk through the property, the structure and your plans for the portfolio, usually in 30 to 45 minutes.
2. Your documents, once. Uploaded through our secure portal.
3. Research the market. We compare rent tests and criteria across lenders and set out your options in writing.
4. Decision in principle. Where useful, so you can move quickly on a purchase.
5. Full application. We package the case for the underwriter, explaining the portfolio and anything unusual up front.
6. Offer to completion. We keep your solicitor and the lender moving, and we stay in touch for your next purchase or refinance.

The first consultation is free. Tell us about your plans and we'll aim to come back to you within the hour during office hours.