80% buy to let mortgages
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80% buy to let mortgages
People become landlords for a lot of reasons; to build wealth for the future, to generate a stream of rental income, as an investment or because they have a genuine interest in the property market. Whether you’re delving into being a landlord for the very first time, or you’re a long-term property investor, there’s nothing quite like the joy of finding the ideal property. But, how are you planning to fund your venture? With rising property prices and changing rental markets, many buyers simply don’t have the cash to cover large deposits, and that’s where 80% buy-to-let mortgages come in.
At Everest Mortgages, we help new and experienced landlords to secure 80% buy-to-let mortgage deals, giving you the flexibility to grow your rental portfolio without needing to save a huge deposit first.
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What is an 80% buy-to-let mortgage?
There are a lot of mortgages out there, ranging from fixed term mortgages with impressive rates, to variable rate mortgages with a lot of room for flexibility. But, if you want to buy a property and rent it out to tenants, you’ll need a buy-to-let mortgage. These come in all different shapes and sizes, but 80% buy-to-let mortgages are some of the most popular.
80% buy-to-let mortgages allow you to borrow up to 80% of the property’s value, meaning you will only need a 20% deposit. This makes it a lot easier for you to purchase a property and rent it out, without having to put yourself under a lot of stress saving a hefty deposit.
80% buy-to-let mortgages work in a similar way to other buy-to-let mortgages; the only difference is the loan-to-value (LTV) ratio. They strike the perfect balance between accessibility – as you’ll only need to save a deposit of 20% beforehand – and risk management for lenders.
Who are 80% buy-to-let mortgages best for?
First time landlords
If you’re starting your property investment journey and haven’t managed to build up a large savings pot for a deposit, 80% buy-to-let mortgages make entering the market more achievable.
Investors expanding their portfolio
If you’ve already got properties to your name, an 80% buy-to-let mortgage can help you to spread capital across multiple investments and diversify in the property market, rather than tying up all of your cash in a single deposit.
Landlords wanting a safety net
When you keep your deposit lower, you’re able to reserve funds for renovations, unexpected costs or further investments, giving you a financial safety net.
Buyers with strong rental prospects
Lenders are more comfortable offering 80% buy-to-let mortgages where rental income is expected to be strong and consistent.
Caculate 80% buy-to-let mortgage affordability
Affordability has a huge impact on whether or not you’re approved for any mortgage, including buy-to-let mortgages, but things work a little bit differently. When you’re buying a residential property, affordability is calculated based on your personal income. But, when you’re buying a property to rent out, projected rental income is taken into account.
For an 80% LTV buy-to-let mortgage, lenders tend to apply slightly stricter criteria, which can include rental income needing to cover a considerable amount of the mortgage, higher minimum income requirements and higher credit scores. Your personal income will also be looked at, but it’s the rental yield that lenders usually put the most weight on.
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The benefits of 80% buy-to-let mortgages
Though there’s a huge range of mortgages out there, 80% buy-to-let mortgages offer a unique set of benefits, including:
Lower deposit requirement
You only need a deposit equal to 20% of the property’s value, which is a lot lower than what many other mortgages require. This makes buying a property more accessible for new landlords, and keeps more cash available for repairs, furnishings or further purchases.
Increased portfolio growth potential
Choosing an 80% buy-to-let mortgage can help you to scale your portfolio faster. If you have a fair amount of savings, you can make the most of the lower deposit, and use the rest to invest elsewhere.
Balance between risk and reward
Though 90% mortgages and 100% mortgages do exist, they’re harder to secure if you’re taking the buy-to-let route, and they often come with much higher interest rates. 80% LTV balances lender risk with landlord reward.
Offered by many lenders
Many lenders are comfortable with 80% LTV mortgages, giving you a wide selection of products and rates to choose from, making it easier to find the right deal for you. This is something Everest Mortgages can help you with.
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Are there downsides to 80% buy-to-let mortgages?
As is the case with any mortgage, there are a few things to consider before you settle on an 80% buy-to-let mortgage.
Higher rates compared to lower LTVs
If you had a larger deposit, and therefore borrow less money, you would enjoy better mortgage rates.
Rental stress tests can be strict
As lenders are taking on more risk by lending you 80% of the property’s value, they may require stronger projected rental yield.
Not all lenders offer 80% LTV
Not all lenders offer 80% LTV mortgages, which might mean you need to shop around. Luckily, Everest Mortgages is on hand to help.
Higher landlord risk
With a higher mortgage balance, rental voids or unexpected costs can have more impact on how successful you are as a landlord.
FAQs
Frequently asked questions
Can I get an 80% buy-to-let mortgage with bad credit?
Yes, but it depends on a lot of other factors, such as the severity and age of your credit issues. Some specialist lenders still consider 80% LTV if you have bad credit, though rates may be higher and you might be judged against stricter criteria.
Are 80% buy-to-let mortgages available for first time landlords?
Yes, many lenders accept first time buyers for 80% buy-to-let mortgages. However, as you’re diving into being a landlord for the first time, they may require a minimum personal income or stronger rental potential.
Do I need a minimum income for an 80% buy-to-let mortgage?
Yes, usually. This differs between lenders, which is why it’s important to work with a mortgage broker. At Everest Mortgages, we know what lenders are looking for.
What types of properties can I buy with an 80% buy-to-let mortgage?
Most standard residential rental properties qualify for 80% buy-to-let mortgages, including houses, flats, new builds and ex-local authority properties, depending on the lender.
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