Buy to Let Mortgages Without Income Proof | UK Investor Guide

Getting a buy to let mortgage with no proof of income can be difficult but not impossible. Some lenders may accept you for a mortgage without proof of income, though this is rare. It’s important to remember that getting a buy to let mortgage with no proof of income will likely mean more expensive interest rates and fees than if you could provide evidence of your income.

Buy-to-let mortgages are advanced on the strength of the business case made by the prospective landlord – will there be sufficient rental income generated to at least cover the n to maintain the mortgage repayments and meet the operating expenses of the buy -to-let business?

That relnce on the buy-to-let business model leads to two further fundamental differences between a buy-to-let (BTL) mortgage and an owner-occupier’s mortgage for the home they live in:

• Because they are essentially business transactions, buy-to-let mortgages are not regulated by the Financial Conduct Authority (FCA), explains the Council of Mortgage Lenders (CML), and
• Affordability – your ability to maintain the mortgage repayments is mainly measured with reference to the lettings business (with any other income you receive used to support your mortgage application).

Both factors may help to make lenders’ attitudes towards establishing proof of income more flexible when you are applying for a buy to let mortgage than, say, a standard residential mortgage as an owner-occupier.

In this article; we’ll look at some of the ways you can get a buy-to-let mortgage with no income proof, as well as the pros and cons associated with each method.

Post Topics

Getting a Rental Income mortgages with no income proof

What is buy-to-let mortgages with no proof of income?

What is meant by BTL self-employed mortgage?

What types of income can be used for a Buy to Let mortgage?

What are ways to prove your income for a BTL mortgage?

Next Steps

FAQs

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Getting a Rental Income mortgages with no income proof

Some buy to let mortgage lenders stipulate a minimum incomeThe minimum income required for a borrower to be eligible fo... for applicants. In the case of HSBC – and several others – for example, a minimum income of £25,000 a year is required.

The relatively low level of qualifying income again reflects the fact that any lender is more interested in the business case for your proposed buy-to-let investment – namely, the likely yield from rents received – than your earned income.

Indeed, once, some lenders were prepared to accept your word for the income you said you earned – a so-called “self-certification” process.

Self-certification was popular among the self-employed, freelancers and those earning commissions since it was at times notoriously difficult to furnish documentary proof of earnings over any sustained period. Because they relied on the honesty of the mortgage applicant – a reliance that was sometimes abused – they became known as “liar loans” by some sections of the media.

For better or worse, however, because of tighter regulation of the mortgage market and more rigorous affordability assessments by the major lenders, self-certification mortgages have been banned in the UK.

What is buy to let mortgages with no proof of income?

Buy-to-let mortgages with no proof of income are mortgages offered to landlords that do not require proof of income from the borrower. This is a rare type of mortgage, as most lenders want proof of income to assess the borrower’s ability to make repayments.

These types of mortgages may be more expensive than those with proof of income due to the additional risk associated with them. To qualify for a buy-to-let mortgage with no proof of income, the borrower must demonstrate that they have sufficient capital or equityThe difference between the value of the property and the amo... and can show that their rental income will cover the mortgage payments.

If you are interested in buy to let mortgages, you can always contact a mortgage broker specialist in such mortgages.

What is meant by BTL self-employed mortgage?

The fact remains, however, that some individuals – especially the self-employed – continue to find it more than usually difficult to furnish the proof of income required by many buy to let mortgage lenders.

But the self-employed may qualify just as easily as anyone else for a buy to let mortgage. Lenders recognise that more important than any other income is the projected success of the buy-to-let business and its reliance on rents received from tenants. More important than your proof of income, therefore, is likely to be your experience of the property market and the private rented sector in particular.

Traditional mortgage lenders who concentrate on the residential market for owner-occupiers may continue to ask for two or even three years of self-employed tax returns – form SA302 which is HMRC’s confirmation of how much you have earned and how much tax has been paid – or the audited accounts of your business for the same period. The aim, of course, is to satisfy the lender that your buy to let mortgage might remain affordable even if rents falter for a while – you have a longer-than-usual void, for example.

But a hard and fast approach in requiring proof of income for the past two or three years overlooks one important reality – and that is the dynamic, constantly changing environment in which you are likely to be self-employed.

For any number of reasons, one year of poor trading might be followed by a more certain performance by your business that sets it on the road to longer-term success. A snapshot of two or three years of SA302 returns or audited accounts, in other words, cannot give the whole or accurate picture of your financial standing and reliability as a buy to let mortgage borrower.

Recognising these realities, more and more buy to let mortgage lenders these days are adopting a pragmatic approach and placing far greater emphasis on the business case to be made by your plans as a landlord and the rental yield your let property is likely to achieve.

While you may no longer be able to self-certify your income, and some proof of income is likely to be required by any buy to let mortgage lender, that proof is expected to be flexible and just one year’s worth of accounts, or a single SA302 return may suffice.

We would suggest you to contact a mortgage broker to help with any  kind of  BTL mortgage and residential mortgage application process.

What types of income can be used for a Buy to Let mortgage?

When considering affordability for a Buy to Let mortgage, lenders typically consider a variety of income sources.

Here are some common types of income that may be taken into account:

Rental Income: The primary source of income for a Buy to Let mortgage is the rental income generated from the property. Lenders will typically assess the rental potential of the property and may require a minimum rental coverage ratio to ensure the rental income covers the mortgage payments.

Personal Income: Some lenders may also consider the borrower’s personal income, particularly for first-time landlords or those with a limited rental income history. This can include salary, self-employment income, or other regular income sources.

Other Rental Properties: If you already own other rental properties, the rental income from those properties may also be taken into account by lenders when assessing affordability for a new Buy to Let mortgage.

Investments and Savings: Lenders may consider income generated from investments, such as dividends or interest from savings accounts, as part of the overall income assessment.

Pension Income: If you have a pension, lenders may consider this as a source of income for a Buy to Let mortgage, particularly for older borrowers.

It is important to note that each lender may have different criteria and requirements regarding the types of income they accept for Buy to Let mortgages. Additionally, lenders may apply stress tests to ensure affordability in different scenarios. It is advisable to consult with a mortgage adviser or speak directly with lenders to understand their specific criteria and requirements for Buy to Let mortgages.

What are ways to prove your income for a BTL mortgage?

As per UK requirements, here are the common methods for proving your income for a buy-to-let (BTL) mortgage:

Proof of Employment Income:

• Payslips: Provide three months’ worth of payslips, showing your gross and net earnings, tax deductions, and any other relevant details.

• P60: Submit your P60 form, issued by your employer, which summarizes your total earnings and tax contributions for the previous tax year.

• Employer’s Letter: Obtain a letter from your employer, confirming your employment status, salary, and any applicable bonuses or commissions.

Proof of Self-Employment Income:

• Self-Assessment Tax Returns: Provide self-assessment tax returns for the last three years, showcasing your business’s profits, losses, and any pertinent tax information.

• Audited Accounts: If your business is audited, submit copies of the audited accounts to demonstrate financial stability and transparency.

• Business Bank StatementsA record of a borrower's financial transactions often requir...: Provide business bank statements for the past six months, reflecting income, expenses, and cash flow.

Next Steps

Getting a btl mortgages is always challenging but with the right documentation and advice it can be made easier. Having the correct information ready when applying will ensure a smoother and quicker process. Speak to a mortgage adviser or lender about your income requirements for a btl mortgages with no proof of income. They can advise you on what documents they need to assess your application and how best to prove your affordability.

FAQs

What qualifies as a no minimum income Buy to Let mortgage in the UK?

In the UK, a no minimum income Buy to Let mortgage is a product that does not stipulate a minimum income requirement from the borrower. Instead, the focus is placed on the viability of the rental property to generate sufficient rental income to cover the mortgage payment. This type of mortgage is particularly attractive to professional landlords and portfolio landlords who may not have a traditional source of income but generate significant rental earnings from their properties.

Can rental income solely cover Buy to Let mortgage repayments?

Yes, for a Buy to Let mortgage, the rental income can indeed be the sole source of income considered for mortgage repayment. Lenders typically conduct an affordability assessment, where the expected rental income must meet or exceed a certain percentage of the monthly mortgage repayment, often factoring in potential void periods. This is known as the rent to mortgage payment ratio, and it’s a critical lending criterion for Buy to Let mortgages.

What proof of income is needed for a UK Buy to Let mortgage?

When applying for a Buy to Let mortgage, proof of income is typically required to satisfy the lender’s affordability criterium. For a mortgage without proof of personal income, the lender will require evidence of the rental income potential of the property, which can be demonstrated through a professional valuation. However, if personal income is considered, bank statements, tax returns, or in the case of a self-employed individual, accounts prepared by a certified accountant, may be necessary.

Is obtaining a Buy to Let mortgage feasible with adverse credit history in the UK?

Obtaining a Buy to Let mortgage with an adverse credit history can be challenging, but it’s not impossible. Specialist lenders may be willing to consider applicants with a less than perfect mortgage history, particularly if the investment property presents a strong case for rental income and the applicant can provide a larger deposit. Expert advice from a specialist mortgage broker can be invaluable in such circumstances to navigate the wide range of mortgage products available.

How can self-employed individuals secure a Buy to Let mortgage in the UK?

Self-employed individuals can secure a Buy to Let mortgage by providing proof of their income, which can be more complex than for those in conventional employment. Mortgage lenders will typically look for at least two years of accounts or tax returns to assess annual income. A mortgage broker can assist in presenting the mortgage application in the best possible light, highlighting the consistency of income, whether it’s from the business, rental property, or another source of income.

What are the borrowing limits for UK Buy to Let mortgages based on rental income?

The borrowing limits for Buy to Let mortgages are primarily determined by the rental income the investment property will generate. Lenders use a calculation known as the ‘rental coverage ratio’, which requires the rental income to be a certain percentage over the monthly mortgage repayment. This percentage varies among lenders but typically ranges from 125% to 145%. The actual amount borrowed will also depend on other factors, including the type of property and the landlord’s mortgage history.

Can contractors find Buy to Let mortgages in the UK without traditional income proof?

Contractors can find Buy to Let mortgages in the UK, even without traditional income proof. Lenders will often consider a history of contracts, the day rate, and the contract’s duration as part of the affordability check. A specialist mortgage broker can provide mortgage advice and help contractors find a mortgage product that suits their unique personal circumstances.

What are the age restrictions for securing a Buy to Let mortgage in the UK?

Age restrictions for securing a Buy to Let mortgage in the UK can vary by mortgage lender, but typically, applicants must be at least 18 years old. The upper age limit at the mortgage term’s end can range from 70 to 85 years. It’s important for a mortgage applicant to check the age criteria as part of their mortgage option research.

How does ‘Top Slicing’ work for Buy to Let mortgages in the UK?

‘Top Slicing’ is a method used by some lenders to help Buy to Let mortgage applicants meet the affordability criterium. If the rental income alone does not meet the lender’s requirements, the borrower’s personal income can be used to ‘top up’ the shortfall. This is particularly useful for high-earning individuals who have significant disposable income to support their Buy to Let ambitions.

What are the implications of not having a Buy to Let mortgage for a rental property in the UK?

Operating a rental property without the correct type of mortgage can lead to significant issues. If a property is mortgaged with a residential mortgage rather than a Buy to Let mortgage, and the lender has not agreed to a ‘consent to let’, the borrower could be in breach of their mortgage terms. This could result in an equitable charge or demand for the original loan to be repaid in full. It’s crucial to have the correct mortgage product and to seek mortgage approval for any property purchase intended for letting.