Are you looking to purchase a property to rent out? If so, you may be wondering how much you can borrow with a buy-to-let mortgage. The amount you can borrow is linked to the rental income you expect to receive from tenants. Generally, lenders require rental income to be 25 to 30% higher than the mortgage payment. Buy-to-rent mortgages are designed to help you buy a property that you intend to rent out, rather than live in it. The amount you can borrow normally depends on the rental income you expect to get from tenants, although other income may be considered in some cases.
Generally, you'll need a higher deposit amount for a purchase-to-rent mortgage. Estimate how much you can borrow based on rental income. Most lenders typically require you to receive 125% of your monthly interest payments in rental income, but sometimes they can be as high as 145%. The amount you can borrow in a purchase-to-rent mortgage is based on the rental income you could earn from the property, as well as the applicant's annual income. Unlike most residential mortgages, purchase-to-rent mortgages are usually arranged with interest only, meaning that the mortgage repayments are only used to pay the interest accrued on your loan and not the principal you have borrowed. If you already have a purchase-to-rent mortgage and want to borrow more money, talk to your lender and see if they allow you to do so.
If your current lender doesn't allow you to borrow more and you're not bound by your current contract, you may want to remortgage to an alternative lender that takes a more flexible approach. If, for example, you want to borrow more loans to make improvements to the property that increase the amount of rent you're likely to receive, it's quite possible that they'll allow you to, as long as you meet their affordability criteria. There's no strict limit on the maximum amount you can borrow, but mortgage providers will want to make sure that your rental income represents at least 125% of your monthly interest payments. Rather than focusing primarily on your current income and expenses, as they would if you were applying for a standard residential mortgage, lenders will want to know how much income their buy-to-rent property can generate when deciding how much they can borrow.
