One of the biggest factors that will impact how much rental income you can earn is, quite simply, how much you can borrow. Lenders won’t provide just anyone with a massive loan to buy and rent out multiple properties right off the bat, even if you buy properties in London with high rents and demand.

Instead, you need to start small. How much you can borrow depends massively on several factors, like your deposit, the property you want to buy, and your own finances. So, if you were wondering with a mortgage buy to let “how much can I borrow,” then this guide is for you.

How much is buy to let mortgage?

There are many factors that go into your borrowing range. For example, your buy to let mortgage limit will depend on:

• Property value
• Loan-to-Value
• Deposit amount
• Personal finances
• Landlord experience
• Rental income potential
• Interest cover ratio
• Stress test
• And more

Buy to Let mortgage: How much can I borrow breakdown

It’s okay if you aren’t familiar with those lending criteria, don’t worry. Here are a few of the bigger factors broken down:

1. Property Value: The property’s value, how much the property can be rented for, and how in-demand it is will affect how much you can borrow.
2. Loan to Value (LTV): Buy to let mortgages typically cover less than residential mortgages. This means you need to have a lower LTV. You can lower the LTV by putting forward a bigger deposit. In general, lenders will only cover 75% of the property’s price or even less.
3. Personal Income: Lenders will look at your personal finances to see if you can cover all your debts in case of void periods.
4. Interest ratio: Lenders will want rental payments to cover more than the mortgage payment. If your property could earn between 125 and 145% more than the mortgage payment, you should be good to go, though other factors may come into play.
5. Stress test: Interest rates can increase. What lenders want to know is whether you can continue to pay those increased repayments even after interest rates rise. With that in mind, the lender may test to see if you can still pay a mortgage that goes up 1, 2, or even 3%.

How much deposit on a buy to let mortgage?

You will, on average, need between a 25 to 40% deposit to secure a rental property. If you already own the property, then you’ll need to have 25 to 40% equity in the property to make the switch.

A property that costs £300,000 will need a £90,000 deposit at minimum. You can also need a rental income of around £1250 if your mortgage is £1000.

How much are the fees for a buy to let mortgage?

There are also fees that you will need to consider. These fees include:

1. The higher stamp duty: As your rental property is a second home, you will need to pay the higher stamp duty. This is an additional 3% on top of the standard stamp duty tax.
2. Legal fees: You will need to budget the conveyancer and attorney costs.
3. Valuation costs: The lender may require you to pay their valuation costs.
4. Surveying costs: You should always pay for a survey on the property you wish to buy so you understand its condition and the potential repair costs before you sign.

What other costs will affect my rental unit?

The fees won’t stop there, either. After you secure the unit, you can expect these fees to cut into your income:

1. Maintenance and repairs: There is a rental reform bill that will increase the requirements on private landlords. Part of the bill includes fixing all damp and mould within a strict timeline. With that in mind, budget the cost to fix those common issues ahead of time.
2. Letting agent fees: If you use a letting agent to find tenants, you will be the one paying the fees.
3. Property management fees: If you want to have someone else manage your property for you, this will also cost more.

All of these costs will change depending on the size of the property and where it is located. You will need to do your research to discover the full fees you can expect to pay depending on your exact circumstances.