Many people make money by becoming landlords.
Some even make it their sole source of income. And for those who do, taking out multiple buy-to-let mortgages is invaluable.
But how many buy-to-let mortgages can you take out?
Read on to find out.
What is a buy-to-let mortgage?
A buy-to-let mortgage is taken out specifically for a property that will be let (/rented out) to tenants.
Someone who takes out this type of mortgage will typically agree with the building society or bank that the property will be used specifically for this reason.
Most (although not all) buy-to-let mortgages are interest-only.
However, you must be willing to either remortgage, sell the house or pay off the loan in full at the end of the mortgage period.
What is the alternative to a buy-to-let mortgage?
One alternative to a buy-to-let mortgage is to gain consent-to-let permission from an existing mortgage lender.
This is official permission to let from a mortgage lender. It’s needed when a mortgage was originally taken out under different terms (i.e., namely that the borrower would be resident in the property).
How buy-to-let mortgage applications are assessed
With a buy-to-let mortgage, the amount you charge for rent dictates the amount you can apply for. So, in this rare instance, your salary is almost insignificant.
In other words, the higher the rent you charge, the larger the mortgage you can get – regardless of most other factors.
Buy-to-let mortgage deposits
Finally, buy-to-let properties typically require a larger deposit (at least 25% in many cases) because they are considered riskier investments by the lender.
How many buy-to-let mortgages can I have?
Technically speaking, there is no limit to the number of buy-to-let mortgages someone in the UK can have.
However, individual lenders will limit the amount of money they are willing to lend to one person. This is primarily to minimise the lender’s own risk.
Large vs. small mortgage lenders
Most large mortgage lenders in the UK limit the number of buy-to-let mortgages one person can have to between 3 and 5.
By contrast, some smaller lenders may let you take out more than this.
Big lenders’ limitations do not stop any individual from approaching another mortgage lender. However, some will restrict how many mortgages you can have with other parties.
Generally, the more buy-to-let mortgages you take out, the more criteria you may have to meet in the application process.
Why might someone want multiple buy-to-let mortgages?
Property developers and investors are the most common categories of multiple buy-to-let borrowers.
These often generate most of their income from tenant rent payments. So, the more buy-to-let mortgages they have, the more money they can make.
Pros and cons of having multiple buy-to-let mortgages
Pros
Property developers and investors increase their profits by taking out many buy-to-let mortgages.
More mortgages mean more tenants are paying rent overall and more flexibility in purchasing properties when good opportunities appear.
Cons
Buy-to-let mortgages typically have higher interest rates and higher deposits than regular mortgages.
Having more mortgages also means more risk.
Assessing and administering a higher volume of tenants can be challenging and time-consuming.
This task becomes more complex when different mortgages have different terms and conditions.
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