Buy-to-Let Mortgages Without Income Requirements Explained
Rental property mortgages vary considerably depending on the terms and the lender, but a mortgage that doesn’t include a minimum income rule is no different from any other, aside from this change to the qualification criteria.
In addition, most property investors and landlords expect to use the rental income generated by their property to cover the mortgage costs – if your projected yield is many times higher than the repayment cost, you may have no issues proving affordability.
Note that although buy-to-let mortgages without an income policy exist, they aren't available everywhere and are primarily a product structured through an independent broker, negotiating directly with a specialist lender focusing on buy-to-let mortgages.
Other criteria will still apply, and some lenders will request a business plan to demonstrate your expectations from your investment and assess the viability of your property investment strategy.
However, buy-to-let properties can be self-sustaining, and if your other application circumstances are very low risk, you have a much better chance of securing a buy-to-let mortgage irrespective of your income – particularly important for those in retirement.
Why Do Buy-to-Let Lenders Wish to See a Separate Income Stream?
Minimum income requirements are a peculiarity of the buy-to-let lending sector, and there is rarely any expectation that you will use other earnings outside of the rental income to pay your mortgage costs.
Some lenders have similar policies that vary slightly and are based on the rental value of the home, either in addition or instead of a minimum income rule.
For example, a lender may state that all buy to let mortgage applicants need to demonstrate a rental yield of at least 25% above the expected monthly mortgage repayment. Therefore, a buy-to-let mortgage with a repayment of £1,500 per month would be approved if the rental income has been valued at £1,875 a month or more.
Lenders will also factor in the running costs of the property, such as insurance, upkeep and utilities, depending on the rental agreement and how closely you fit within their affordability and risk assessment profiles.
Demonstrating Compliance With Minimum Income Criteria for Buy-to-Let Mortgages
Although much depends on your selected lender, some will accept any earnings as part of your eligibility assessment – although others will only lend to applicants with £25,000 income a year from employment or self-employment.
However, you might be able to meet this policy requirement by providing evidence of varied earnings, including:
- Pension income
- Rental yields
- Benefit payments
- Gifted funds
- Savings accounts
- Bridging financing
If you are reliant on a non-standard income source to apply for a buy-to-let mortgage, we strongly advise working with an independent broker since some lenders will automatically refuse your application – careful analysis is key to getting your mortgage deal over the line.
Providing Evidence of Income as a Buy-to-Let Mortgage Applicant
Buy-to-let mortgage applicants with a permanent job can easily evidence their income by providing copies of payslips and bank statements – but this may not be quite so straightforward if you have different earnings outside of conventional employment.
Self-employed applicants can also provide tax returns and business accounts to show their earnings, and most lenders will ask for at least two to three years of records.
If you wish to apply for a buy-to-let mortgage, and your primary income source is rent from a property or another income stream, you have a few different ways to approach the mortgage assessment process.
Landlords With Income Generated From Property Portfolios
Property investors with up to four properties and without an external source of income can produce sets of accounts as self-employed taxpayers, backed by their tax returns, and use these documents to show their annual income.
Those with larger portfolios with a higher number of properties may find that some lenders will impose a limit whereby they will only offer a buy-to-let mortgage for applicants within their threshold.
Therefore, your focus may be on selecting a suitable lender with whom you do not currently have other buy-to-let mortgage products, although some will only lend to a maximum value as a total of your borrowing from any mortgage providers.
Buy-to-Let Mortgage Applicants With a Pension
Retired property investors who draw income from a pension fund can withdraw a lump sum of up to 25% without a tax obligation, provided they are over 55, and lump sum drawdowns are included within their specific pension product terms.
Using a lump sum drawdown in lieu of other income isn’t advisable if you are under 55 because you will likely incur a substantial tax penalty.
Another route is to provide a pension statement, which will show the overall value of your fund and any regular withdrawals you are using as income, which some lenders will accept as a different income source from employment.
Applying for a Buy-to-Let Mortgage With Benefits
Mortgage lenders may have varying attitudes to benefit income, and some will include benefits such as disability allowances and other payments as part of your income assessment, whereas others will be reluctant to lend to buy-to-let applicants using benefits as their primary proof of income.
Proving Minimum Income With a Bridging Loan
Bridging finance is a flexible short-term lending product commonly used by buy-to-let investors to finance the costs of renovating or refurbishing a rental property investment, increasing its value before reselling or remortgaging.
The majority of lenders will disregard bridging finance when assessing your eligibility for a buy-to-let mortgage because the short-term nature, and high-interest cost, linked with this type of property are unlikely to mean it forms a long-standing element of your income.
Applying for a Buy-to-Let Mortgage With Savings Assets
If you have either accumulated savings, or been gifted cash, perhaps as part of an inheritance, you may potentially be able to use the capital as proof of income to meet your chosen lender’s requirements.
However, in line with money laundering regulations, they will need to see evidence that your funds have originated from a legitimate and safe source, so you may need to hire a financial adviser to help you pull together the documentation and records.
Mortgage applicants using gifted finances to apply for a buy-to-let mortgage will also often need to ask their benefactor to provide written confirmation that they are not expecting the funds to be returned.
Independent Advice on Buy-to-Let Mortgages Without a Minimum Income
If you would like to secure buy-to-let funding and cannot meet the usual minimum income requirement or have complex and varied income sources, an independent broker can assist.
We provide a whole-of-market service, with access to thousands of potential products, and can recommend lenders with the flexibility to be able to accept your application, regardless of how your earnings are structured.
Please get in touch with Revolution Finance Brokers at any time to discuss the buy-to-let mortgage market and those products which may be a good fit if you do not have a separate income stream or have been turned down due to minimum income policies.
2023-05-09 
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