Mortgaging a buy-to-let property when you are already a landlord

Wondering how taking out a buy-to-let mortgage works when you’ve already got one or two on the go?

We’ve put together this quick guide for those landlords out there who want to expand their property empire by buying a new property. You could find it especially helpful if you’ve inherited your current rental property, and don’t have any prior experience of applying for a buy-to-let mortgage.

Assessing the property

Before agreeing to purchase a buy-to-let property, speak to your usual mortgage provider to see if they’re prepared to lend on it. Even with an existing customer relationship, they may refuse if it doesn’t meet their underwriting criteria.

This is particularly sensible as many prime rental properties fall foul of some lenders’ underwriting requirements. Such as:

Ex-local authority properties.
  • High-rise flats (above the sixth storey).
  • Any property with a poor valuation and in need of renovation.
  • Homes with concrete or similar non-standard construction.
Calculating what you can afford

Until you’ve got a signed tenancy agreement in place, you’ll need to speak to a lettings agent and get a written rent projection. If you decide to come to us, we’ll take 90% of this into account when looking at affordability; the other 10% we ignore, on the basis that you may have management fees and the cost of repairs to factor in. And, of course, you may not get what you’re asking for it.

Be aware that some mortgage providers will look only at your rental income when it comes to affordability calculations, so you should strongly consider getting your rent projection in place before deciding to purchase. Here at Together, on the other hand, we will take other income into account as well – potentially helpful if you split your time between being a landlord and another job.

One option is to mortgage all your buy-to-let properties as a portfolio, including the new property, in one place. This gives you a single monthly repayment, with all of your rental income collated for the purposes of affordability. While some mortgage providers place limits on the size or value of portfolios they are prepared to lend on, we don’t.

Raising a deposit

On a buy-to-let property, you’ll typically need to provide at least a 25% deposit, although some lenders’ underwriting rules may mean you can get away with less. Be aware that you may need more depending on the property and other circumstances. Do your research; a mortgage advisor can help.

If you’re lacking ready cash for a deposit, you could remortgage one or more of your existing properties to release some of the equity. Or, if you’re happy with your current mortgage deal and you have the equity available, you can take out what’s known in the industry as a ‘second charge’ mortgage.

These are perhaps better known as ‘secured’ or ‘homeowner’ loans. They are widely available if you’re using your own home as the security, and some lenders (including Together) will let you use one or more buy-to-let properties as the security instead.

Other requirements

Some lenders will insist that you have a degree of landlord experience before allowing you to mortgage an additional buy-to-let property, which may be several years. So you may want to hunt down (or rather keep) paperwork that proves how long you’ve had a tenant; a copy of your first-ever tenancy agreement, for instance.

Mortgage providers will also ask you to supply a copy of the property’s EPC rating, which the vendor must provide. These days, many insist on a minimum ‘E’ rating (since this is the new minimum legal requirement of rental properties), although here at Together we’ll consider properties with an ‘F’ or ‘G’ rating on a case-by-case basis.

We do this because we recognise that the condition of a property isn’t permanent, so if your potential purchase falls into one of these lower brackets, we’ll likely ask you about renovation plans.