Contrary to popular belief, it is possible to get a mortgage on a Buy to Let investment property if you have a low income or no regular income.
Although most lenders will require you to have an income of £25,000 or more before they will accept you for a mortgage, there are plenty of lenders for which this isn’t the case. No minimum income Buy to Let mortgages are designed for people who do not have a regular salary, meaning it’s still possible for them to gain the funds they need to purchase a property to let out.
What is a Buy to Let mortgage with no minimal income?
A Buy to Let mortgage with no minimum income is just that – it means there is no threshold for income which won’t be accepted. These are usually used by people who plan to gain their income from their property investment, so potential rental income will be taken into account in terms of their repayment affordability.
Whilst not all lenders are happy to give mortgages to people under these circumstances, there are specialist lenders who are. There will still be other criteria that need to be met, and you may be asked to provide a business plan to show proof of how much you are expecting to earn from your Buy to Let investment – but you can often get the finance you need without bringing in a certain amount of money every month from employment or other means.
This type of mortgage is basically for people with a self-sustainable income, meaning that they can easily meet their mortgage repayments as well as have enough to live on, and are not considered risky to the lender. This doesn’t necessarily mean that you are employed or self-employed; it can mean that you’re living off of a pension or other kind of allowance.
Can you use your rental income to pay your mortgage?
Yes. Many lenders won’t allow you to use potential rental income as proof of affordability, but you can still use your rental payments to pay off your mortgage debt. Your lender may request that you have a 25% surplus yield above the mortgage payment from your monthly rental income, so, for example, a charging rent of £1,875 to cover a mortgage payment of £1,500. They – and you – will also need to consider any additional costs you may incur as a landlord, for example insurance and maintenance fees.
If you take out a Buy to Let mortgage with no minimum income, your lender is more likely to factor in rental income as part of your affordability, so this type of mortgage could be more suited to your personal circumstances.
We always recommend that you speak to a qualified financial advisor to ensure that the mortgage you choose is right for you.
What kinds of income can you use for a Buy to Let mortgage?
There are a variety of different income sources that you can use to pay your Buy to Let mortgage repayments, including:
Savings/existing or gifted funds
It should be noted that not all lenders will accept each of these income sources, and you should do your research in advance to make sure you’re going with a provider that works with clients in your financial situation.
At CLS, we are the UK’s number one specialist mortgage advisors and have access to thousands of exclusive mortgage deals that you won’t find anywhere else. If you want to find out more about how we can help you secure the right no minimum income Buy to Let mortgage, please do not hesitate to get in touch.
How to prove your income for a Buy to Let mortgage
Although for most people it can be easy to prove their income with payslips and tax returns, it can be much harder for people who don’t have a steady income or who aren’t employed.
If the majority of your income is coming from investment properties, there are a few different options.
For landlords with less than four properties:
If your income is exclusively from your rental income and you have no other job or income source, you should be able to provide the accounts from your properties or your self-assessment tax return to prove how much you’re bringing in.
For landlords with more than four properties:
If you are a portfolio landlord, lenders tend to take a different approach and may have a restriction on how many properties they’re happy for you to have. Many will have a maximum limit for mortgaging with them, as well as a maximum limit mortgaged with any lender. This won’t include any properties that you own outright.
If you’re using a pension
Once you’re over 55, you can withdraw cash from your pension tax free for up to 25% of its value. If you’re under 55, this is not advised, as the tax implications can be huge. You will be able to provide evidence of your funds through your pension provider.
If you use a self-invested personal pension (SIPP), then you can use the entirety to fund investment plans, including purchasing investment properties.
If you’re using benefit income
If you want to use your benefit income for a Buy to Let mortgage, different lenders will accept different variances. Some will consider state benefits, such as disability allowances, and others may not. Most will be more inclined to use a long-term tax benefit than something that’s more short-term, such as child tax credits. It’s always worth working with a specialist mortgage broker who will be able to identify the best lenders for your circumstances.
If you’re using a bridging loan
Many investors use bridging loans to make quick purchases or fund property renovations before they sell the property on. As these are generally used for short-term funds, they are quite expensive and so are avoided for more long-term finance needs. For this reason, it’s unlikely that bridging finance will be taken into consideration as affordability for your mortgage repayments, as it will be expected that you will have sold the property in order to pay back your bridge loan.
You will need to have a pre-agreed exit strategy with whichever lender provides your bridging loan, and this will need to be planned carefully, as it is unlikely that rental income alone would be enough to cover it.
If you’re using your savings or gifted funds
This one can be trickier, as most lenders will want proof of where your funds have come from. It may be worth working with a financial advisor who can help to provide evidence and answer any complicated financial questions that may arise from the lender.
If you are using gifted funds, the lender will most likely want confirmation from whoever has given you the money that they won’t be asking for it back.
Can I take out a Buy to Let mortgage with no minimum income if i have a poor credit history?
Most mortgage providers would prefer for you to have a healthy credit history, as it proves to them that you are competent at managing your money and have not run into trouble with your debtors in the past. However, some providers will take on cases from those with less-than-perfect credit profiles.
There are a whole host of things that can cause a poor credit rating, including:
County Court Judgements (CCJs)
Defaults on your credit file
Too many hard searches on your credit file
An IVA, DMP or DRO
Although having bad credit can sometimes narrow your mortgage options, it doesn’t mean you’ll automatically be refused a loan. All lenders have different eligibility criteria, and there is an increasing number of companies in the market that are prepared to take a view on less-than-desirable credit profiles.
We work closely with a huge range of specialist mortgage providers and will be able to find you the best possible deal based on your circumstances.
Applying for a Buy to Let mortgage with no minimum income
There are a few different factors that will be taken into account when you apply for a Buy to Let mortgage with no minimum income, and you will usually need to provide:
Details of your credit history
Other personal details (your age, occupation, address etc.)
The details of the property you’re purchasing
Details of your regular income/how you are planning on making your repayments
Details about any other assets you own that you could secure funding against if necessary
At CLS, we want to make the process as quick and simple for you as possible. All you need to do is send us your details and we will get in touch to arrange your free consultation, during which we can discuss your options in more detail.
Wherever possible, we will provide you with a range of deals from suitable lenders, and we will be on hand to talk you through each of them so that you can decide which will work best for you.
We’re happy to take over the application process, too, meaning you can rest safe in the knowledge that your mortgage is being dealt with by the professionals. We will provide regular updates so that you know where you are in the process and can always answer any questions you may have throughout the journey.
We also offer face-to-face mortgage advice throughout Essex and the South East of England, as well as an online mortgage advisor service via telephone and email to customers throughout the UK. Our offices are open late, making it even easier for you to get in touch when you need help.
If at any point you’d like to discuss your options with us, change any information or just get an update on the status of your application, our friendly team are always here to help.
Things to consider before taking out a Buy to Let mortgage with no minimum income
As with any financial decision, it’s important to take time to think about whether it’s the right move for you. A few things that you should consider include:
The general pros and cons of becoming a landlord. Remember that you will be responsible financially for resolving any issues that your tenants may have, even if you use an external management company.
Taking into account the viability of your investment in terms of the type of property you’re purchasing, the location it’s in, and the demand for rentals. It may be worth speaking to local estate agents to get a better understand of what’s possible and how successful your property could be.
Saving as much as you can towards your deposit as possible. This will bring your monthly repayments down and give you more equity in your property.
Considering the additional costs that go hand in hand with being a landlord, such as those relating to letting fees, insurance and emergency maintenance.
If you’re planning on using an external property management team, be sure to speak to several different companies to compare the services on offer and find an agreement that’s a good fit for your requirements.