Mortgage Advisor Edinburgh & Dundee
We will provide you with helpful information whether you’re buying your first house, moving house, remortgaging, or investing in a buy-to-let property. Call us today to talk through your residential or rental property plans.
Residential Mortgage Criteria
For residential mortgage criteria, affordability is typically assessed by calculating your income against your outgoings through an Agreement in Principle (AIP).
A few reasons why it is a good idea to obtain an AIP certificate:
- You know how much you’re likely to be able to borrow narrowing the property search
- Having evidence of this also makes you a more appealing buyer when putting an offer in on a property
- It will give a seller and their estate agent confidence that you’re serious about the purchase.
The minimum age criteria is usually 18 years old and the deposit amount can be as low as 5%-10% depending on the lenders criteria and associated schemes for First-Time Buyers.
Buy-to-Let Mortgage Criteria
In contrast, affordability on a buy-to-let mortgage application is assessed differently as lenders are more concerned about whether or not your rental income will be enough to cover your mortgage.
Some lenders require applicants to be a homeowner, be of a minimum age (usually between 21-25 years old), and have a minimum income of £25,000, but not all require applicants to have an income.
Usually, lenders require a minimum 25% deposit for a buy-to-let mortgage application.
Your property may be at risk if you do not keep up repayments on any debt secured against it.
What is LTV or Loan to Value?
LTV is a way of working out how much you are borrowing compared to the total cost of the house which is calculated using percentages (%).
For example, take a house price of £200,000 and a 10% deposit for this house price which is £20,000.
Once you subtract this deposit from the house price, you get the total value of your mortgage:
£200,000 – £20,000 = £180,000 (Mortgage Balance)
Next, divide the mortgage balance by the house price:
£180,000 / £200,000 = 0.90
Finally, multiply this figure by 100 to get the LTV percentage:
0.90 x 100 = 90% (LTV)