If there’s previous bad credit showing on your credit file, then as with most forms of borrowing this can definitely limit the options available to you for a buy to let mortgage in Scotland.Potential credit issues you may be faced with are a low or impaired credit score, defaults, County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs), and Debt Management Plans (DMPs).

I help people with these kind of issues every day but in general the smaller the amounts involved, the less severe and older the issue, and the larger the deposit, the more chance there is of approval.

Worst case, if it’s not feasible to apply for a mortgage right now, I can and will still work with you and advise what things need to be done to improve your chances in the future. for a

Apart from the fact that the owners of  the property (or any direct relations/family) are unable to be a permanent resident there, the main difference between a buy-to-let and a residential mortgage is the way affordability is assessed.

With BTL, lenders will generally assess affordability based on rental potential and the ability of the projected rental income to cover the mortgage payments. For a residential mortgage meanwhile, affordability is based on personal income.  Some BTL lenders do factor personal income into their affordability calculations and overall assessment of a case, however the deciding factor is usually the level of the potential rental income. 

Interest rates and deposit requirements can also be higher for buy-to-let mortgages (you will need at least 20% of the property value but more often a minimum of 25% will be required)

And unlike their residential counterparts, a buy to let mortgage in Scotland will almost always not be regulated by the Financial Conduct Authority (FCA),

A rental return is the difference between the rental income your property generates and the amount of interest due on your mortgage each month, expressed as a percentage.

For example, if your mortgage interest payments are £500 per month and your rental income is £550, the rental return on your buy-to-let property would be 110%.

Most lenders require to see a projected rental return of at least 125% before they’re willing to offer a BTL mortgage, and they will assess whether a property meets this requirement by also carrying out a stress test. 

Rental yields, meanwhile, are the amount of cash your property generates, calculated as a percentage of its value, and broken down into net and gross values. These are not relevant in respect of mortgage assessment but are something that all buy to let investors should be aware of and consider as one of the measures of how any investment in property may perform.

To calculate your rental yield, simply divide the purchase price of the property by the amount of yearly rent it brings in. For example, if the purchase price is £100,000 and the rent is £800 per month, then the annual rent is £9,600 and your buy-to-let property yield would be 10.4%. Many will tell you that a rental yield of 8% or more is desirable however other factors should also be considered.

The quick answer is yes, you can!

While there are fewer buy to let mortgage products available for limited companies compared with what’s on offer to individuals, the good news is that thanks to growing demand for these products, more lenders are entering into this particular market.

While it isn’t always the right mortgage for a property investor, applying for a BTL limited company mortgage can make a difference to the return on your investment.

Speaking with an expert about the difference between buying a property through a business or with a personal BTL mortgage can help you better understand which option would work for you. 

Many buy-to-let mortgage lenders base affordability on the projected rental income alone, but some do have minimum personal income requirements, too.

The BTL mortgage providers which impose this restriction won’t usually lend to anyone who earns less than £25,000 from other sources, however there are a several buy-to-let mortgage providers who lend to customers with no regular personal income and base agreements entirely on rental income.

That said, even those lenders with no minimum income requirements will generally wish to know that you have either savings or some level of income available which would be able to cover the mortgage payments if any rental void periods ever arose. 

In order to obtain the most competitive rates and have the greatest choice of lenders, a minimum deposit contribution of 25% is required.

There are some lenders however, who will consider applications based on just a 20% deposit contribution and a very very small number who would potentially be willing to look at applications on which only a 15% deposit contribution was necessary.

As with typically any type of mortgage lending however, the lesser the deposit contribution and the higher the loan to value the greater the risk becomes to the lender and the applicable interest rates will also likely be higher to reflect this.

Hopefully the above information has been useful but if you have any other questions or are ready to start your own property journey now, please fill in the enquiry form and we will get in touch!

This article is intended to be a generic overview and each individual situation will need to be considered carefully, with the final decision being down to the lender.