Lots of people enjoy investing in property. Many landlords make significant sums of money by purchasing houses and then renting them out to tenants – with some even making this their sole source of income.
In this instance, for someone trying to go down this route, taking out multiple buy to let mortgages can be valuable. But is taking out multiple buy to let mortgages even possible – and if so, how many are you able to take out?
We’ve provided clear answers to these questions, and more, in the blog below.
What is a buy-to-let mortgage?
A Buy-to-Let mortgage means that a property has been purchased with the sole purpose of being 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.
The vast majority (although not all) of buy to let mortgages are interest-only. This means that you don’t immediately pay off the full sum of the mortgage, and instead only have to initially pay back the interest on the loan. 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.
With a buy to let mortgage, the amount that you will be charging for rent dictates the amount that you can apply for. In this rare instance, your salary is almost insignificant. The higher the rent you will be charging, the larger the mortgage you can get.
Finally, buy to let properties typically require a larger deposit (at least 25% in many cases) because they are considered a riskier investment 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 usually limit the amount of money that they are willing to lend one person, simply to minimise their risk.
Most major mortgage lenders in the UK will limit the number of buy to let mortgages one person can have at somewhere between 3 and 5. However, some smaller lenders may let you take out as many as you like.
While the big lenders’ limitations do not stop any individual from approaching another mortgage lender, some will set restrictions on how many mortgages you can have with other parties.
You should also keep in mind that the more buy to let mortgages you take out, the more ‘hoops’ you may have to jump through in the application process. This is simply so the bank or building society can ascertain that you are a reliable recipient of their loan.
Why might someone want multiple buy-to-let mortgages?
Property developers and investors are the most common people that want to take out multiple buy to let mortgages. These individuals will often generate most of their income from the rent payments made by tenants – so the more buy to let mortgages they have, the more money they are able to make.
Pros and cons of having multiple buy-to-let mortgages
Lots of property developers and investors are able to make huge amounts of money by taking out lots of buy to let mortgages. This can provide a significant financial advantage to taking out lots of this type of mortgage.
On the other hand, taking out multiple buy to let mortgages can be time-consuming and risky. With lots of tenants, it can be even more challenging to ascertain that they are all highly reliable, and are continuing to follow all the terms of your agreement. It may also be more time-consuming for landlords to maintain all the properties in their portfolio – especially if there are lots for them to keep track of.
Buy to let mortgages typically have higher interest rates, and higher deposits, so landlords keen to take out several mortgages will need to factor this into their calculations, when deciding whether multiple mortgages is a worthy investment.
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