Buy to let mortgage lenders typically want rent to cover 125% of the mortgage repayments so they can be comfortable there is “wriggle room” in the event of rental voids and to cover costs. This is not generally calculated at the pay rate i.e. the interest rate on the product but a nominal rate decided by the lender which is generally higher. For example:
• £100,000 purchase price generating £500pm rental
• £75,000 mortgage (75% Loan to Value)
• 3% mortgage payment, however the lender could use a nominal rate of 5.5% i.e. £344pm
• 125% of £344pm = £430pm
Minimum income for Buy to Let investment
Although most lenders criteria requires that applicants be earning a minimum of £20,000 or £25,000 (so they can be comfortable that any rental voids be met) there are financing options available for those with little or no provable income.