If you’re looking to invest in a buy to let property in Hastings or the wider East Sussex area, one of the first questions you’ll likely have is: how much can I actually borrow? The answer isn’t always straightforward, as lenders assess buy to let applications differently from standard residential mortgages.
Understanding how borrowing limits are calculated – and what factors affect them – is key to planning your investment with confidence.
How Lenders Work Out Borrowing for Buy to Let Buy to let mortgages are primarily based on rental income, and lenders use a calculation known as the rental coverage ratio to assess your application. Here’s how it works:
- Rental income expectations: The anticipated rental income must usually cover between 125% and 145% of the monthly mortgage payments. This ensures there’s a safety margin in case interest rates rise or the property experiences a void period.
- Practical example: If your mortgage repayments are £800 per month, your rental income would typically need to be at least £1,000 to £1,160 depending on the lender.
The Role of Personal Income Even though rental income is central, many lenders also consider your personal income to ensure you can cover costs if the property is temporarily vacant. Key things to note include:
- Minimum income requirements: Many lenders require applicants to have a minimum personal income of around £25,000 per year.
- Self-employed applicants: If you’re self-employed or have variable income, you’ll likely need to provide extra documents such as tax returns or business accounts.
How Property Type and Location Affect Borrowing Not all properties are viewed equally by lenders. Your borrowing potential can depend on where and what you’re buying:
- Standard homes in popular areas: Properties in good condition in high-demand areas like Hastings are generally easier to mortgage. Lenders see these as lower risk.
- Non-standard properties: Flats above shops, listed buildings, or homes with unusual construction might limit your mortgage options or require a larger deposit.
How Deposit Size Influences What You Can Borrow The more you can put down, the more borrowing flexibility you may have. Here’s how deposit size comes into play:
- Minimum deposits: Most buy to let lenders require a deposit of 20–25%.
- Better deals with more equity: A 40% deposit may unlock access to lower interest rates and a wider range of mortgage products.
Getting a More Accurate Figure Every situation is different, and the best way to understand your specific borrowing potential is to speak with a broker who knows the market. Connect Mortgage Services can help you:
- Review your financial situation and goals
- Estimate how much you could borrow based on current criteria
- Match you with lenders who are comfortable with your plans and chosen property type
Whether you’re buying your first investment property or building a portfolio, getting the numbers right from the start puts you in a stronger position to make smart choices.
