A common concern for property investors contemplating a new buy-to-let investment is if they earn enough income. Now you will know the answer!
Unfortunately, due to industry terminology, the answer is often misunderstood. The advice received from our friends in the pub, that you don’t need any income for a Buy-to-Let Mortgages.
When we say “No Minimum Income” we do not mean “No Income Required”. The mortgage industry is at fault for using this confusing terminology.
The use of “No Minimum Income” is to allow flexibility (instead of £25,000 or more). Instead, the lender requires you to have an income that supports your lifestyle. £24k, £21k or £15k whichever, as long as your personal financial situation is self-sustainable. You can meet your commitments and have some disposable cash to live your life.
If you have no income, lenders will see you as high risk. The potential is that instead of paying the mortgage the funds from rent may be used elsewhere to support your living.
“No Minimum Income” comes into play well, perhaps you are living on a pension or disability payments, etc.. You can support your own living even if not employed / self-employed.
I hope, we’ve helped clarify the difference between “No Minimum Income” and “No Income”.
Though not all mortgage lenders operate that criteria. Out of the 60 Buy-to-Let Mortgage lenders, we surveyed:
- 08 Mortgage Lenders have complex income criteria.
- 04 Mortgage Lenders require £30,000 minimum income.
- 19 Mortgage Lenders require £25,000 minimum income.
- 07 Mortgage Lenders require £20,000 minimum income.
- 03 Mortgage Lenders require £18,000 minimum income.
- 19 Mortgage Lenders have no minimum income.
As you can see 68% of mortgage lenders have a set minimum income, which just 32% offer “no minimum income”.
Those lenders that have a set minimum income can often go further, such not including rent from your other properties in the minimum requirement. This rules out a lot of professional landlords with a portfolio.
There is also some weird juxtaposed positions on income. We have lenders that require £25,000 minimum income unless you’re an experienced landlord then they have no minimum.
Whilst others that have £30,000 minimum income that increases to £75,000 if you have 4 or more buy-to-let properties.
Some will have lower income requirements; if you are not an ex-pat, if you owned a BTL for more than 12 months, if you have no children, if the mortgage is under £1m and a variety of other reasons.
There are a few takeaways from this topic:
- The value of a specialist mortgage adviser in ensuring your income requirements match the best mortgage available for your circumstances.
- The value of keeping your job to keep your mortgage options open.
- There are more lenders requiring a set minimum income than those that have no minimum.
- If your a professional landlord, with no other income. You could limit your options.