Mortgages

Mortgages

Help and guides for buy-to-let

Becoming a landlord is an exciting opportunity, but also needs to be carefully considered. The key to a successful buy-to-let investment is to plan your finances and choose the right property, and our useful guides can help you on your way.

Our buy-to-let criteria

  • The maximum loan to value for a buy-to-let mortgage with Virgin Money is 75%.
  • Your minimum personal income (excluding income received from buy-to-let properties) needs to be £25,000 per annum. If your application is in joint names, the combined minimum income will also be £25,000.
  • The rental income must cover 125% of the mortgage interest.
    Calculated at a notional rate of 5.99% or the pay rate of the selected product, whichever is higher.
  • We do not accept BTL applications for first time buyers. For joint applications, at least one applicant must have been an owner occupier for at least 6 months on the date of decision, and we may request evidence of this.

Upfront costs

  • Stamp duty and legal fees, including surveys / valuations
  • You will need a deposit in order to secure a mortgage
  • Obtaining compulsory inventories, gas and electricity safety certificates
  • The cost of any minor repairs required before tenants move in
  • Furnishing costs – you can choose to let your property out with or without furniture and your rental price will probably reflect this
  • Refurbishment and development costs if you plan to buy a property to improve or update
  • Letting agents – you may choose to find your tenants with the help of an agency, who will charge for this service

Ongoing costs

  • Maintenance and repair of the property in the long-term
  • Void periods - there may be periods where you don’t have a tenant so your mortgage payments won’t be covered by rental income. In order to make sure you can still meet your monthly payments, you should aim to raise rental income of at least 125% of your mortgage payments – most lenders will require proof of this affordability when considering your application.
  • Landlords insurance
  • If you decide to use a management agency to help with the ongoing management then they will charge a fee for this

Buying a new rental property

Rental returns are important to consider before you buy so study the local area and try to buy in a location that you know will be attractive to prospective tenants. Things that will make a property more attractive are:

  • Walking distance from public transport
  • Good commuter links to the nearest city or town
  • Close to hospitals or Universities
  • For family rentals being close to good schools
  • If you plan to furnish your property you should consider the quality of your fixtures and furnishings – whilst it may be more costly upfront, better quality décor will attract tenants and also last longer.

If you are just starting out as a landlord you might want to go for a low maintenance property so you have less to worry about. For example, flats can be great for first time landlords as its unlikely you’ll have to think about the building structure and problems on the roof as this will be the responsibility of the freeholder.

Renting your current property

If you decide to move out and rent your current residential property you’ll need to get permission from your current lender and make your insurer aware. Depending on your lender and your individual circumstances, you may have to switch to a buy-to-let loan, but this isn’t always the case.

Choosing your tenants

Finding good tenants isn’t something you should take lightly; after all they will be living in and essentially looking after your property.

Setting your price

Make sure you have researched the rental market in your area so you can set a realistic rental price for the size and location of your property. You can look online and in local newspapers to get an idea of what other people charge.

You should make sure you get a deposit and confirm the tenants can pay this upfront. Typically this will be at least one month's rent (some landlords insist on more) to safeguard yourself against any damages, or if the tenants move out unexpectedly you have money available to make your mortgage payments. Landlords are no longer entitled to hold tenants' deposits; they are now held in a tenancy deposit protection scheme so you will need to set this up and provide the tenant with details of it within 14 days of taking their deposit.

Attracting tenants

In addition to the points referenced in the 'choosing your property' section, paying attention to the details of the interior of your property will go a long way when it comes to attracting tenants. No matter how buoyant the rental market becomes, you should always make sure your property is in the best possible condition so you can attract quality tenants.

If you already have tenants in whilst prospective tenants are viewing your property, make sure they clean and tidy up, and ask for all of the furniture to be in the original position.

Handy tip: Decorate with neutral colours so that this will work with whatever colour scheme your potential tenants may already have, (e.g. their bedding, ornaments etc). Also, flowers and scented candles are a nice touch to make the place smell fresh and homely.

Security checks

It’s important to get personal and professional references, to make sure you're comfortable with your new tenants. You may even want to think about running a credit check to make sure they will be able to make their rental payments, as well as to verify they are who they say they are. The National Landlords Association offers a tenant check that includes bankruptcy and county court judgement searches.

Should I use a letting agent?

If you're busy and worried about the time it may take to find and vet tenants then you may wish to consider help from a letting agent. They will usually charge a fee as a percentage of the tenant’s total rent. Typically they’ll provide all or some of the following:

  • find and fully vet prospective tenants
  • draw up a suitable tenancy agreement
  • advise on and arrange inventory and condition reports
  • help with changes to utility accounts and council tax
  • carry out a market appraisal to assess the rent the property will fetch
  • collect rent and pay the money to you

If you do decide to use a letting agent, it’s still worth meeting the tenants yourself to make sure you're happy and have established contact from the start.

Your responsibilities

Before you invest in a buy-to-let property, there are certain requirements and responsibilities you need to think about.

As a landlord, you must:

  • Understand and comply with the legal requirements, including health and safety obligations towards the tenant and any licensing or registration rules.
  • Treat your tenants fairly.
  • Understand the commercial risk. (Because the property is not your home, a buy-to-let mortgage is considered a business transaction. If you get into financial difficulty, the arrangements that lenders put in place for residential mortgages to help borrowers avoid losing their home, will not apply.)
  • Think about how you will pay your mortgage and other costs during ‘void periods’ when your property is empty and you do not receive any rental income.
  • Protect the value of your property by keeping it well maintained and, for a leasehold property, meeting valid requests from the freeholder and/or the managing agent.
  • Make sure you have appropriate buildings insurance in place, from the day your mortgage completes and throughout the mortgage term.

You can find more information on the following websites:

The National Landlords Association (NLA)

The Residential Landlords Association (RLA)

The Association of Residential Letting Agents (ARLA)

Key facts about buy-to-let

  • Our mortgages are available for single properties up to a maximum loan amount of £1 million and you can hold up to ten properties up to a total value of £3 million.
  • We calculate affordability based on 125% of the mortgage interest. This will be calculated at a notional rate of 5.99% or the rate of the selected product if higher. This means that you must be able to show that the amount you will receive in rent each month is 125% of either 5.99%, or the monthly interest you will pay on your selected mortgage.
  • We require a minimum income of £25,000 which we will verify in all cases. If your application is in joint names, the combined minimum income will also be £25,000.
  • You can choose the type of mortgage repayment that is best for you. This could be interest only, Capital repayment or part-and-part.
  • The minimum age for someone looking to apply for one of our Buy-to-let mortgages is 21 and there can be up to four applicants for each mortgage.
  • We do not accept BTL applications for first time buyers. For joint applications, at least one applicant must have been an owner occupier for at least 6 months on the date of decision, and we may request evidence of this.
  • If you are remortgaging your main residence on to a buy-to-let loan you must simultaneously complete on the purchase of a new residential property.
  • Some of our buy-to-let products offer a cashback incentive to help you cover the costs of buying a new property or taking out a new mortgage. Cashback amounts may vary across the range, simply refer to our buy-to-let range for full details. Please note, the cash back will be paid upon completion of your mortgage.
  • Our Buy-to-let mortgages are available to individuals only. Currently, we do not offer buy-to-let mortgages to companies.
  • For all BTL new build flats and new build houses the maximum LTV we will lend up to is 75%.
  • The maximum term for a buy-to-let mortgage is 25 years.
  • The minimum property value for a buy-to-let mortgage is £40,000.

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