How do most buy-to-let investors raise finance?
The most common form of finance for purchase of rental property is through buy to let mortgages. Borrowing of up to 85% of the purchase prices is commonly available though most banks and building societies tend to lend 75-80% of the properties value. Criteria for lending varies banks tend to lend based on a combination of the following: • Gross rental income commonly the gross rental income needs to be at least 125% or 130% of the yearly borrowing costs this is calculated based on the standard variable rate buy-to-let mortgage rate at the time • Value of property the banks will value the property independently and lend either 75%, 80% or 85% of the valued price note, this may be lower than the offered sale price and/or asking price In addition, the borrower may look at your earned income, or a combination of your earned income and the rental income of the property. If you have a large portfolio, borrowers will also be interested in your overall borrowing level and rental income level.
