If you are a landlord and are starting to think about expanding your portfolio, the chances are, you’ve started to think about buy-to-let mortgages. You might, if you don’t already own your tenanted property outright, have a buy-to-let mortgage in place, but now with expansion on the horizon, you may be wondering if you can take it a little further and have more than one buy-to-let mortgage in place.
Well, luckily for the property market, the lenders, and the landlords, multiple buy-to-let mortgages can be held by one landlord, but certain caveats may apply.
At the time of writing, there is no limit on how many buy-to-let mortgages a landlord can have, however, individual lenders will limit just how much cash they are willing to lend an individual.
What is a buy-to-let mortgage?
In case you are not already a landlord and have stumbled across this page out of wanting to find out a little more about buy-to-let mortgages, let’s bring you up to speed.
A buy-to-let mortgage is a form of loan used for property that is going to be rented out, rather than lived in by the owner. In many cases, these mortgages are interest-only meaning that the monthly payments are only for the interest the mortgage accrues with the capital being paid back at the end of the term either via selling, remortgaging or simply paying it off.
With different lending criteria for a buy-to-let mortgage to that of a typical residential mortgage, the landlord wishing to borrow the money must provide a much higher deposit than you’d see on a regular mortgage. Typically, around 25% or more. They then must prove that the rental income will meet or exceed approximately 125% of the mortgage payments.
Can I rent out my home without a buy-to-let mortgage?
Sort of, but without consent, you’ll be in all sorts of legal trouble. You can gain consent to let from a lender instead. This is where your current lender grants you the right to rent out your home despite the mortgage initially being taken out on different terms.
How many buy-to-let mortgages can you have?
Much depends on the lender and your financial position. Technically, there are not really any limits to how many buy-to-let mortgages you can have, however, once you have four or more rental properties all on buy-to-let mortgages, you’ll be known as a portfolio landlord and may benefit from a portfolio mortgage. This is a mortgage product that puts all your properties under one mortgage and sees more through assessments of your entire portfolio when applying for additional mortgages.
Many lenders in the UK state that one person can only take out up to 5 buy-to-let mortgage products and others may put no such restrictions in place. This means you could, in theory, take out three mortgages with one lender and three with another. However, the more you borrow, the more you could find yourself having to meet stricter lending criteria.
For example, lenders will put a cap on how much can be borrowed by one person in order to reduce the risk to the lender.
What factors does a lender consider when you apply for more than one buy-to-let mortgage?
A buy-to-let mortgage is considerably different to a residential mortgage as the lender looks at the rental income rather than personal income as a determining factor in eligibility and the amount that can be borrowed. As mentioned earlier, they want to see that the money coming in covers approximately 125% of the mortgage.
Before even getting this far though, some lenders may even consider your age. Some will not offer multiple buy-to-let mortgages or even one BTL mortgage to anyone aged over 75, others may have a younger age set as their maximum and some may put no age restrictions in place at all.
They will then look at your current situation, current income, any debt and how well you manage your existing rental properties. If your properties remain vacant for long periods, a lender is less likely to consider offering you an additional buy-to-let mortgage as you may struggle to pay the ones you already have due to lack of occupancy.
That being said, your track record as a landlord will also be considered. If you have always kept up payments, have a history of being a successful landlord and have a plan in place for tackling periods without tenants, you will be seen more favourably by lenders. Those looking for multiple buy-to-let mortgages for the first time may find it much harder as the lender won’t see as much of a history to base their decision on.
They will then look at your capacity for multiple buy-to-let mortgages. If one more mortgage could put undue stress on your finances and make other commitments harder to fulfil, they may not be as keen to lend to you.
Finally, your deposit will be taken into account. You’ll need at least 25% of the property value to secure a buy-to-let mortgage and the more you have, the better chance of success you’ll have.
Are there risks to having more than one buy-to-let mortgage?
As with anything financial, there is always a risk both for the lender and the person borrowing.
For the lender, there is the concern that the money they offer isn’t paid back as per the terms agreed and that they may lose out should the financial situation of the lender get dire.
For the borrower, there are the higher interest rates and deposits to manage as well as the multiple mortgages themselves. Should you hold three different buy-to-let mortgage products, you’ll need to keep on top of them, and this may not always be easy. Especially if one or more properties remain vacant and you have to find a way to cover payments for them all despite only receiving income for one.
Perhaps one other risk, often not considered initially, is the fact that most buy-to-let mortgages are interest-only. With each monthly payment only covering the interest, you’ll need a plan to repay the capital at the end of the mortgage term. This can often be tricky should your circumstances change; the rental income dry up or the mortgage products you need are found to be no longer affordable.
What can I do if I need more than one buy-to-let mortgage?
You could speak to your existing lender. They already know you; they have an understanding of your finances and may be able to offer you a better deal than those available to new customers. However, the best option would be to speak to a specialist buy to let mortgage broker. They can source a host of mortgage deals that align with your property goals and don’t put undue strain on your finances. With expert, impartial advice, you won’t be swayed by a salesperson trying to get a commission or hit company targets. Instead, you’ll get full transparency and honesty about the products available to you.
Why not speak to our team at Mortgage Saving Experts? We’ve been helping first-time buyers, those looking to release equity, and of course, landlords secure the best possible mortgage for their needs. Our mortgage consultation can help set you on the right path. Call our experts today!
