How much can you borrow?
As well as your own financial circumstances, rental yields can also impact how much you can borrow for Buy to Let properties.
Rental yield is the return a Buy to Let landlord could make on a property. It’s worked out by taking the total rent payments for a year and dividing it by the property value, then multiplying this figure by 100.
1,200 x 12 = 14400
14,400 / 200,000
X 100
= 7.2%
You may be required to have more of a deposit for Buy to Let properties – often 40% of the full property value. Typically, you’ll require a deposit of at least 20-25% of the property’s sale price.
Like residential mortgages, your eligibility can depend on several factors, including:
- Initial deposit
- Current salary
- Credit history
- Existing debts
- Rental yield
Remember, you’ll have to pay Stamp Duty (Stamp Duty Land Tax in Scotland) on any property you won’t be living in that’s worth more than £40,000 – so make sure you consider this when borrowing for a Buy to Let property.