Buy To Let Mortgages With 20% Deposit
When it comes to buy to let mortgages, one of the key factors that differentiate them from their residential counterpart is the size of the deposit required to secure the deal. Whilst a homeowner can often secure a residential mortgage for as little as 5%, you can expect to put down a considerably larger deposit when it comes to buy to let mortgages.
It is common practice for lenders to ask investors for a 25% deposit before handing out a buy to let mortgage, which means you will need to reach into your pocket if you want to get a foothold on the buy to let property ladder.
However, if you are thinking about investing in buy to let property there might yet still be some good news. Providing that you meet the criteria, there are some lenders who might be willing to accept lower deposits of 20% (on some occasions 15 %!) for a mortgage.
Changes to the buy to let regulations
From 2017, further changes to how buy to let mortgages are regulated will be implemented that will make it harder for those looking to secure finance for buy to let properties.
Due to the changes of the regulations, lenders will look at landlords’ applications for buy to let mortgages with more scrutiny than before.
Firstly, lenders will require landlords to have a rental coverage ratio of at least 145% for a standard buy to let and 170% for a house in multiple occupation. Under previous regulations, landlords only required a rental coverage ratio of 125%. This may make it more difficult to secure a buy to let mortgage from a traditional lender.
Secondly, lenders will apply a stricter stress test to prioritise the affordability of the mortgage. As a result, landlords will have to prove that they can afford repayments in the event that interest rates increase to 5.5%.
Finally, if a landlord has more than one buy to let property, lenders will review their entire property portfolio before granting a buy to let mortgage. If a landlord has multiple properties, but only a few are profitable, then a lender will not provide a buy to let mortgage. This means that landlords can no longer spread equity across their portfolio.
Am I able to secure a 20% deposit buy to let mortgage?
Depending on where you go, different lenders use a range of different criteria and requirements to determine whether you are a worthwhile investment. However, as general rule lenders tend to take the following into consideration before offering a buy to let mortgage with a 20 deposit%.
- Age – Typically, lenders will view older borrowers as a larger risk investment, and therefore might be less likely to accept a smaller deposit if you are an elderly investor.
- Credit rating – If you are able to demonstrate how you have had little to no problems with credit in the past, you could be on your way to securing a buy to let mortgage with a 20% deposit. However, if you have a poor credit history, you might have to expect to put down a 25% deposit for a buy to let mortgage.
How do I find a buy to let mortgage with a 20% deposit?
Buy to let mortgages with a 20% deposit are harder to come by in comparison to normal buy to let mortgages, which is why it is important to shop around. Additionally, that’s why we also recommend seeking advice from a mortgage broker or independent financial adviser. As a mortgage broker, we work with the majority of UK lenders, and have access to exclusive buy to let mortgage deals that are not available on the high street, which means you’re more likely to find your ideal buy to let mortgage deal with a reduced deposit that bit easier.
To find out if you might be eligible to obtain a buy to let mortgage with a 20% deposit, why not call us today on 0117 403 4474, or fill in our online contact form to request a call-back for a free initial consultation with one of our advisers.