When considering commercial mortgage applications for buy to let property, most lenders base their decision on the expected rental level and whether the rental income minus expenses will cover the mortgage repayments. Some lenders are now offering buy to let mortgage products for first time landlords that will also consider a landlord’s personal income as part of their affordability criteria.
These mortgages could be the answer to people investing in properties in low rental yield areas. After the mortgage has been repaid, the property can still show a profit, and capital growth can add to the value of the buy to let business.
These mortgages will also appeal to self-employed people with a high income who want to increase their revenue through buy to let property. Borrowers will be required to pay at least a 25% deposit.
At the beginning of 2018, the National Landlords Association found that 20% of landlords were planning on selling one or more properties. This was due to the extra costs they incur from increased stamp duty and cuts to mortgage interest payment tax relief.
To reduce costs portfolio landlords who own four or more properties have formed limited companies because of the tax advantages. Many lenders have launched mortgage products targeted at these landlords.
The fact that lenders have also launched commercial mortgages for first time landlords shows that despite the difficulties landlords face, investors still regard buy to let property as a good investment.