Updated: January 17, 2022

Can You Get A Secured Loan on a Buy-to-Let Property?

Need a secured loan on a buy-to-let property? Buy-to-let secured loans are easier to get than you might think! Our in-depth guide will tell you all the steps.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: January 17, 2022

A buy-to-let (BTL) secured loan can be a quick way for landlords to release cash tied up in their rental property to get funds needed for home renovations or a deposit for their next investment.

By following this guide, you’ll understand everything you need to know about secured loans on investment properties, how they work, what the eligibility requirements are and how to find the best rates.

What is a Buy-to-let secured loan?

A buy-to-let (BTL) secured loan is taken out using the equity in your property as security. It’s also called a second charge mortgage as it gives you a second mortgage on top of the first one you originally took out to buy the same rental property.

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How do they work?

A second charge mortgage enables you to exchange the equity currently stored in your property for cash, freeing up funds for further investments. It can only be taken out if you have enough equity that can be held as further security against the loan.

For example, if your home is worth £300,000 and you have a mortgage of £200,000, then you have £100,000 worth of equity. You can use this £100,000 as security when applying for a BTL secured loan.

What are the benefits and disadvantages?

A BTL secured loan can open doors for investment opportunities where they previously might have been shut. However, it does come with certain risks attached. Here are the main pros and cons of this type of borrowing:

Benefits

  • Turns bricks and mortar back into cash that you can use for your next project
  • A strong alternative to remortgaging; there are no early repayment charges for secured loans
  • If your credit score is low, getting a BTL secured loan could open doors to a better deal on interest rates

Disadvantages

  • A BTL secured loan will, in effect, mean you now have two separate mortgage obligations to pay each month
  • If your credit score is poor, interest rates for secured loan BTL mortgages can be high
  • This type of borrowing uses your property as security which means your home could be at risk if you fall behind with the repayments

How to get a Buy-to-Let secured loan

Step 1 – Check your affordability and credit score

You’ll need to make sure you not only have enough equity to be used as security but also that your income is enough to cover repayments for both mortgages. And as with all mortgages, your credit score is key to securing a good interest rate – so check your credit rating and make sure it’s up to date.

Step 2 – Prepare your paperwork

Prepare your proof of income as well as the documentation for your existing mortgage to clarify what balance is outstanding and confirm the equity in your property. It’s also good to come prepared with details of any plans you may have for the secured loan (new property, renovation budgets etc.)

Step 3 – Speak to an experienced secured loan broker

Interest rates for secured loan mortgages can be high, so if you go directly to a lender you may not get the best deal and end up overpaying on interest. A broker with specialist experience will work hard on your behalf to take you to the right lender with the lowest possible interest rate.

We work with brokers throughout the UK who have experience in this area of lending and offer a free service to connect you to the specialist you need.

Eligibility Criteria

You will need to prove your income and affordability for loan repayments, but the amount a lender will lend will vary from one provider to the next – each has their own criteria for approval, as outlined here:

Income and affordability criteria:

  • Your income – many lenders have a minimum income requirement of £25,000. If you’re self-employed, lenders will want to see two-three years’ worth of certified accounts.
  • Rental income – for a buy-to-let mortgage, most lenders require a rental income at a minimum of 125%-145% of mortgage repayment costs.
  • Expenditure – this includes what your total mortgage repayments will add up to, and any other credit or commitments that impact your outgoings. High outgoings compared to income could result in the lender capping the amount you can borrow.
  • Available equity – how much equity do you have tied up in your property?
  • Credit history – a poor credit record could impact the rate you get on your secured loan.

Other criteria

  • Age – the minimum borrowing age usually ranges from 21 – 25 and the maximum age from 74 – 85. However, a small minority of lenders don’t have any age restrictions at all.
  • How the property will be used – most lenders will lend to a borrower planning for single assured short-term tenancies, but if you’re looking for a BTL for more specialist rentals such as holiday/short-term lets, houses with multiple occupants (HMOs) or student flats, you may need to get help from a broker in finding a specialist mortgage.

Landlord experience – many lenders will look at your experience as a landlord and your property portfolio if you already have a BTL mortgage.

Get matched with a secured loan specialist

Secured loan buy-to-let mortgages can be a good solution for anyone looking to release equity in their investment property. The best way to get the most bang for your buck on this type of mortgage is by speaking with an expert broker who can shop around the entire mortgage market to save you time and money and find you a great deal.

We can help you make sure that releasing more equity doesn’t mean compromising what matters most, like having financial security or a good deal on the interest rate. We offer a free advisor-matching service that matches people with their ideal secured loan broker, and there’s no obligation to take things further after an initial consultation.

Give us a call on 0808 189 0463 or make an enquiry so we can match you with the right expert today.

Ask us a question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Buy-To-Let mortgages. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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