What is a B2L mortgage?

If you intend to buy a property for renting then you will need a Buy to Let (B2L) mortgage. This will normally be secured against the property to be rented.

The amount you can borrow is linked to the amount of rental income you might expect to receive. B2L mortgage lenders differ in approach. For example, one might require the projected rental income to be 130% of the proposed mortgage payment. Another may be happy with 125%, they vary quite a lot. This is to allow surplus rent to cover other costs such as maintenance to the property and periods when there are no tenants living in the property.

The Credit Crunch has focused lenders minds somewhat to the extent that few, if any, will allow you to self certify your income and will require proof that a background income to cover your personal expenditure exists to cover day to day living. This is often set at £25k

Another variable used by B2L mortgage lenders is the amount of deposit required, and generally the more attractive rates to you the customer are associated with larger deposits but as a minimum expect to be finding 25% of the purchase price from your own resources, and be prepared to be able to prove it. Even if you are looking to buy your property at Below Market value (BMV) expect the lender to demand some form of cash contribution as 100% funding does not exist without you offering additional security.

The type of security can often be an issue, ex-council properties have a limited market, as do new build flats and apartments, principally because there is a glut of them on the market at present and many remain untenanted. Properties that are classed as Houses in Multiple Occupation (HMO) also put a lot of B2L specialists off, and we generally resort to approaching these commercially.

Some lenders also choose the level of business at which they are comfortable and few if any will lend on properties with a market value below £60k, and often have upper limits to reduce their exposure.

If you build a portfolio of B2L properties with a particular mortgage lender then you need to be aware of the lenders overall exposure to any one client. For example a B2L mortgage lender may only allow a client to borrow £5 million. Whilst £5 million may not be too restrictive a few lenders set their exposure limit as low as £500,000 (£500,000 may not even allow a landlord to purchase a property in central London).

Finally, your status as a prospective borrower will determine who we can you to help you, experienced landlords generally command better terms, but ex-pats, offshore Trusts and Limited companies are also often used to acquire B2L properties so choosing the right lender can avoid a lot of wasted time.

Above all, this is a very fluid market with rates and terms changing by the day, so contact us to find out what packages are currently available to help you.