Deposit For a Limited Company Buy to Let Mortgage
If you’re planning on purchasing a buy to let property through a limited company, you may be wondering how much deposit you’ll need. Here we explain how lenders assess affordability for buy to let mortgages and how the size of your deposit can affect your options. How much deposit do you need for a limited
If you’re planning on purchasing a buy to let property through a limited company, you may be wondering how much deposit you’ll need. Here we explain how lenders assess affordability for buy to let mortgages and how the size of your deposit can affect your options.
How much deposit do you need for a limited company buy to let mortgage?
The standard deposit required for a limited company buy to let mortgage is typically 25%. However, some lenders will accept a deposit of 15% or 20%.
The deposit required for a buy to let mortgage is higher than that of a residential mortgage. This is because lenders view buy to let mortgages as riskier since borrowers depend on rental income to cover mortgage payments. For example, landlords may experience periods when the property is vacant, resulting in no rental income, but they still need to pay the mortgage.
Generally, the larger your deposit, the better the mortgage rate and the lower the interest rate. This is because having a small deposit limits your choice of lenders, and those available may consider your application riskier.
How much can a limited company borrow for a buy to let mortgage?
You may be able to borrow up to 85% of the property purchase price.
Unlike a residential mortgage, the amount you can borrow is not based on your personal income. Lenders calculate affordability and how much you can borrow based on the rental value of the property. The rent the property can achieve should be at least 125% of your mortgage payment. For example, if the rent is £1,200 pcm then the mortgage payment can be no more than £960 pcm, ideally less than £960 pcm to reduce risk and increase mortgage affordability.
Some lenders may require the rent to cover more than 125% of the mortgage payment.
Is it difficult to get a limited company buy to let mortgage?
No, generally speaking it’s not difficult to obtain a mortgage offer on a limited company buy to let property. The basic lending criteria is:
- Age 21 or over
- Earn £25,000 or more
- Good credit score
If you meet these three criteria you’ll be more likely to obtain a mortgage offer with a smaller deposit of 15% or 20%.
Speak to a mortgage advisor
If you’re ready to speak to an advisor about your mortgage requirements, get started here. Once we receive your details we’ll be in touch!
