Can I get a Rental Income mortgage?
- If this is your sole source of income, ironically many lenders are very hesitant to lend. The reason is that it falls into an area called ‘unearned income’.
- The argument lenders use against using this as income is that you may have some properties with little/no debt on them now. But post granting you a loan, you could ramp up the lending and therefore reduce your income and your ability to repay the loan.
- It’s not impossible to obtain a Rental Income mortgage as some lenders do accept this, but for the reasons mentioned above, it can be more difficult than you would think.
- If you are looking to bolster the amount you can borrow by adding your rental income, to your personal income (whether that is employed or self employed) the right lenders are quite open to this
How much can I borrow with a Rental Income mortgage?
- If you wish to use rental income as a basis for your mortgage application this should be evidenced in a formal way.
- For example, via income declared to HMRC for the last 3 years. Other criteria will vary from lender to lender and the usual affordability rules apply.
- Lenders will consider the 2–3-year income period submitted to work out the level of borrowing they will offer.
- Some lenders work on a basis of the gross rental income minus your costs (such as mortgages). This will often work out more generously, but fewer lenders offer this.
How much does a Rental Income mortgage cost?
- A mortgage based on rental income may attract a higher interest rate.
- Check with your mortgage broker on the current Rental Income mortgage rates.
- Depending on your situation, some of the high street banks offer keenly priced options but as above, it depends on the type and level of your income
Essential to talk to a Rental Income mortgage broker
- It is essential to talk to a broker that has access to the whole market.
- We have access to lenders, products, and underwriters that the general public simply do not.
- We can advise you on your Rental Income mortgage approval.
Your Rental Income mortgage structure
One of the first things to consider is your repayment vehicle.
Do you want to opt for?
- a repayment loan?
- an interest only loan?
- part & part which is a combination of the two?
What is a Repayment mortgage?
- You make monthly payments and at the end of the term the loan is repaid.
- With a repayment mortgage the monthly payments are higher but with less risk.
What is an Interest Only mortgage?
- You simply pay the interest on the mortgage loan and look to pay off the loan later with say, the sale of property, investments, or bonuses.
- With an interest-only mortgage the monthly repayments are lower but is assessed as higher risk.
Your mortgage product
You will also need to consider which type of mortgage product is best for you as this determines your monthly payments.
- Fixed Rate Mortgage. Your repayments are set for 2,5, 10 years.
- Variable mortgage. This is sometimes cheaper, but the rate can go up or down depending on the market and is often penalty free if you want to remortgage.
Rather than asking how much it will cost, consider how much can you afford. Your broker will then structure your mortgage appropriately, based on your risk profile.
What Rental Income mortgage interest rates can I get?
- The actual Rental Income mortgage interest rate you will be offered will be dependent on your personal circumstance and deposit level.
- Therefore, think about how much you want to spend each month on your mortgage repayments.
- We have access to a range of lenders in the market, and we have access to exclusive mortgage rates.
How much deposit do I need for a Rental Income mortgage?
- The long answer is that it is dependent on your circumstances: purchase price, income, and property type.
- The short answer is – about 15%
- Lenders consider you a low-risk buyer when you put down a 25% deposit or more.
As you can see above, if you are looking for a mortgage based on rental income, your application may not be straightforward. It could require specialist help to get your mortgage approved.
We specialise in this area, so would encourage you to speak to one of the Team just to see what your options are before progressing too far with an application. This will ensure you get a smooth experience when applying for your Rental Income mortgage.
As a top-rated London mortgage broker, we are here to guide you every step of the way.
- Your dedicated mortgage broker will provide you with detailed, personalised advice on how much you can borrow and source exclusive mortgage deals.
- In today’s mortgage market, each borrower is assessed on their individual affordability merits. Once we have talked through your personal circumstances, we will advise you on Rental Income mortgage rates suitable for you.
- This means you get the right advice crucial to ensuring you get the right Rental Income mortgage for your circumstances.
For Rental Income friendly mortgages
Rose Capital Partners takes the time to understand your mortgage goals to secure the optimal mortgage deals for you.
- Our mortgage advice is second to none.
- We will advise you on a mortgage based on rental income appropriate for you.
- Our aim is to maximise your borrowing potential, minimise your monthly payments and work with you throughout the lifecycle of the loan to manage down the mortgage.
- You are treated as a valued client, not a transaction, and dealt with by an experienced, empathetic person, not an algorithm.
- We have access to competitive deals and with no affiliation to third parties.
- We will always act in the best interests of you, our clients, to give you the best mortgage advice possible to achieve the right mortgage for your life’s goals.
Your property may be repossessed if you do not keep up repayments on your mortgage.