Applying for a Buy-to-Let Mortgage with an Existing Residential Mortgage

Purchasing a buy-to-let property can be a fantastic long-term investment, where the revenue gained from rental income could see the property pay for itself – you can also make a substantial income from monthly tenant payments.

A buy-to-let mortgage is suitable for investors looking to purchase a property to rent out rather than to live in. 

Buy to let mortgage are more popular than ever, with 234,000 new buy-to-let mortgages taken out in 2020-21 and 4.5 million tenants currently living in rental properties. 

Most lenders across the UK will offer buy-to-let lending, with some specialising in this mortgage type. Although many lenders are available, you must look into the options available and ensure they line up with your budget and expectations. 

In this guide, Revolution Brokers outlines what you should consider when seeking a buy-to-let mortgage.

The Difference between Buy-to-Let and Residential Mortgages

There are a few key differences when comparing a buy-to-let mortgage to a residential mortgage. 

Firstly it is common for mortgage advisors for buy-to-let properties to be interest-only, meaning that the total loan amount would be due at the end of the agreed loan term. 

This mortgage structure is the most popular type of buy-to-let mortgage within the UK. It allows for lower monthly payments and therefore increases revenue opportunities for the landlord. 

There is an alternative to choose a repayment mortgage depending on the circumstances. Monthly repayments are higher, but the benefit is that there isn’t a large sum to consider at the end of the mortgage term. 

Another differentiating factor is that lenders assess what you can borrow differently with a buy-to-let mortgage. They will primarily look at the rental income achievable instead of your personal income. 

Alongside this, you can typically expect to pay a higher deposit when compared to a residential mortgage. Generally, buy-to-let mortgage deposits start at 25%.

Can I Take Out a Buy-to-Let Mortgage as a Second Mortgage?

There is a simple answer to this question; yes! 

You can take out a buy-to-let mortgage if you already have a mortgage in your name. There are no rules within the UK that stop you from having multiple mortgages.

For each mortgage you wish to take on, including a buy-to-let mortgage as a second mortgage, you would need to meet the criteria set out by the lender. 

Having a buy-to-let mortgage as your second mortgage is common within the UK and is usually a straightforward process as long as the criteria are met. 

The potential stumbling block is that the lender’s perceived risk exposure will grow with every mortgage you take out. 

Lenders will therefore need to evaluate your ability to make repayments against two mortgage products, along with the standard eligibility criteria you would be expected to meet. 

Understanding Residency Rules for Buy-to-Let Mortgages

There are no grey areas for renting out property within the UK. 

If the intended purpose of the property is to rent it out, you must have a buy-to-let mortgage. 

You cannot rent out a property on a residential mortgage, as this practice would breach the terms of your mortgage, and you could face serious consequences. 

Likewise, you shouldn’t live in a property financed through a buy-to-let mortgage as this would not be covered within your loan agreement. 

In certain circumstances, you can gain permission from the lender if they agree by using a consent to let agreement; you can also opt to switch your loan arrangement. 

Finding the Right Buy-to-Let Mortgage Lender

As always, applying for any mortgage can be confusing, and when you receive a rejection, it can be hugely frustrating. 

Multiple refusals can have an impact on your credit report for 12 months due to the consequences of a hard credit search – which happens if you proceed to a full mortgage application, normally after receiving the agreement in principle.

Racking up a long list of credit checks can have repercussions and prevent other lenders from accepting you for a mortgage. They might conclude that you have other credit issues or other circumstances that have led to multiple rejections.

Bearing this in mind, you must seek the right guidance and advice from the get-go. The lending market is saturated, and it can be hard to find the right lender to suit you. 

Taking the time and effort to find the right lender for you is an investment in itself and will have a positive impact on your mortgage journey. 

Revolution Brokers is an independent, whole-of-market broker with years of buy-to-let experience, recommending suitable lenders and accessing your personal circumstances. 

We can help you compile a strong application and ensure that all options available to you are explored and correctly calculated. Get in touch with our friendly team on 0330 304 3040 or email us at info@revolutionbrokers.co.uk.