Buy-to-Let mortgages for a student property

Due to the perceived additional risk to a lender for a buy-to-let mortgage compared to an owner occupier loan, the amount of deposit required will usually be that much greater. For a student buy-to-let mortgage expect to require a deposit, or minimum amount of equity of 25% however there may be more specialist lenders that will consider these types of mortgages with 15%.

Certainly, as you will tend to find right across the market irrelevant of what type of mortgage you require, the bigger deposit you have, or the greater level of equity, the lower the interest rate you will likely have available.

Calculating how much you can borrow for a student buy to let is predominantly done by using the level of rentable income received or expected for the property. As many student accommodations are with multiple occupants and in turn more than one tenancy agreement in place, the rent to loan ratio tends to be adopted from a lenders HMO criteria. Of course this is not necessarily always the case and the calculations below, although not a set rule for all lenders, will serve as a good indicator of what to expect. You may also notice a slight variation for higher rate taxpayers that is also now playing a relevance since the new tax rules have been introduced.

Single occupancy – 125% at 5.5%

Single occupancy higher rate tax payer – 145% at 5.5%

Multiple occupancy (HMO) – 170% @ 5.5%

As already mentioned, these calculations are given as nothing more than to provide a guide. As all lenders make assessments in a different way, with other influencing factors such as the type of scheme you apply for i.e. a 5 year fixed may enable more borrow to be agreed or indeed if you are raising any additional capital with a remortgage on the subject property, it is certainly advisable to do your research or use a specialist broker such as ourselves to do this for you.

To calculate how many students can occupy a property is perhaps more in regard to the legal implications this may have or perhaps simply how much time and cost you may wish to invest.

For the latter point here, the more students that occupy the property the greater degree of supervision and management that will likely be required. It may also be that you will have a higher degree of turnover of tenants.

One legal aspect is if the property will be deemed as an HMO. Typically, if you let the property to 4 or less students it will not come under the classification of a house of multiple occupancy. If 5 or above then HMO regulations will likely be imposed and will then probably need licensing by the local authority. To do so will require the landlord to fulfil certain fire and accommodation standards. These can all result in extra costs. The number of students may also have an influence over which lenders are available to you with some imposing tighter restrictions than others.

Having a history of bad credit can have an influence over any lenders decision regardless of it being for a residential owner occupier mortgage or a more specialist student buy to let. With the student buy to let sector being a much more specialist area this does in turn give much less choice.  Undoubtedly this therefore means that if you have a history of bad credit things may be that little more difficult.

As all lenders have different views and criteria it may still be possible to obtain a student buy to let mortgage with a history of bad credit however, in our opinion, it is wise to use the services of a specialist bad credit mortgage broker with an extensive knowledge of the student buy-to-let market.

With the very nature of student buy to let mortgages being a more niche area this does result in less lenders being available that inevitably affects competition. With this in mind the rates that are available can be a little less attractive than those of their standard buy-to-let counterparts.

However, albeit this may be true, a student buy-to-let as with any investment has to be looked upon as a stand-alone proposition and therefore you still need to ensure the scheme you are arranging for this specific purpose is the most suitable to your own individual requirements.