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Who can get a Student Buy-to-Let Mortgage?
When considering your application for a Buy to Let mortgage, the lender will ask for details about the rental property and how you intend to let it. If your intention is a student property investment, the criteria are likely to be more focused on your own landlord experience, than it would if your intentions were for a single occupancy property.
Access All the best HMO Lenders and Products Today Get a mortgage in principle in minutesExact criteria will vary from lender to lender, but the majority of lenders will require that you:
- Own your own residential property
- Have an income of at least £25,000
- A deposit of 25% or more
- Are able to complete the mortgage before the age of seventy
- Have prior landlord experience – whilst flexible for those taking on sole tenant properties, you are unlikely to be approved for a Buy to Let mortgage on a student property without experience
How do Buy to Let Mortgages work with more than one tenant?
Whilst the actual terms of the mortgage itself will not differ, the lending criteria will. Where you’re buying a HMO (House of Multiple Occupancy) property, your loan offer will be calculated on the rent you can achieve on a room by room basis, rather than on the property as a whole.
In some circumstances, this may mean that you can achieve a higher loan-to-value amount, as student lets have the potential to be more profitable than single occupancy properties. This will very much depend on the individual property, however.
How much can you Borrow for a Student Buy to let Mortgage?
When buying a property to be used as student accommodation the loan amount will be based on a variety of factors. Much like a standard Buy to Let mortgage, the lender will predominantly look at the potential income, in this case, however, on a room by room basis, rather than the property as a whole. As such it’s impossible to suggest an average loan amount, as this will very much depend on your chosen property and its rental potential.
There would also be a stress test of your own personal income to ensure that you are able to maintain payments under a change in circumstances, for example, a rise in mortgage interest or as we’ve seen recently, long term vacancy of the property due to Coronavirus.
The criteria of the stress test will vary from lender to lender, but also depending on your own tax bracket and the duration of your fixed interest rate.
What should you do when students are not around?
As with any mortgage, it will need to be paid regardless of the circumstances, so for buy-to-mortgages, that means through periods of vacancy. You would therefore need to prove that you had the means in place to pay the mortgage in these circumstances.
Whether letting out a converted student house or purpose-built student accommodation, student lettings are usually based on 11 monthly payments, rather than the academic year. This means that students are aware of the need to pay even when they are not in situ.
Most landlords use August to refurbish the property in order to re-let it for the following year. This should be taken into consideration when financial planning, as well as the frequent advertising or property management costs involved with letting properties to short-term tenants.
Whilst logic would seem to dictate that more rooms to let means a higher profit margin, this is not necessarily true when tax liabilities are considered. Income tax will be due on all rental income as well as both capital gains and income tax, should you decide to sell the property. When you own more than one property, stamp duty will be significantly higher on the additional properties, so this should also be considered carefully. You should also be aware that tenancy agreements will need to be amended to accommodate multiple tenants as each individual tenant needs to agree to the contract terms.What else should I be aware of when investing in student accommodation?
How can a Mortgage Broker help you get a Buy-to-Let Loan?
Many lenders prefer to deal with mortgage brokers for buy-to-let mortgages, rather than the public. This is especially true, the larger your portfolio of properties. Consequently, applying via a broker would give you access to significantly more competitive mortgage deals than applying directly.
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