In This Article
What is a buy to let mortgage?
Buy to let mortgages are for landlords who want to buy or refinance a property that is rented to tenants. They work in the same way as residential mortgages, but with a few differences.
For instance, buy to let mortgages usually have higher interest rates than residential mortgages because they’re considered a riskier investment by lenders as many feel that if someone was having trouble paying their debts, they are less likely to not pay their mortgage on their home than one on an investment property.
You are not allowed to live in the property at any time or allow your family to live in it when it has a buy to let mortgage against it.
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About Edinburgh
If you are thinking of buying a buy to let property in Edinburgh, you probably already know a lot about the city. For anybody that doesn’t know the history of Edinburgh and wishes to learn more, hopefully, the text below will be interesting.
Edinburgh is the capital of Scotland and is one of the most visited tourist destinations in the UK.
The city is home to several historical and cultural attractions, as well as a range of interesting shops, restaurants and pubs.
Edinburgh is also a very popular location for students, with several universities and colleges located in Edinburgh.
The city is at the heart of the Edinburgh and Southeast Scotland city region with roughly 1.8 million people and is the location for the headquarters of many Scottish businesses. Edinburgh is also a major tourist destination, attracting over one million overseas visitors each year. Many visit Edinburgh for the famous Edinburgh festival.
Historic sites in Edinburgh include the impressive Edinburgh Castle, the Palace of Holyroodhouse, the churches of St. Giles, Greyfriars and the Canongate, and the extensive Georgian New Town, constructed in the 18th century.
Here is a great website for learning about things to do in Edinburgh.
How would a buy to let mortgage in Edinburgh work?
Mainly, it’s all about the value of the Edinburgh property and what rent it will generate. A buy to let mortgage for a property in Edinburgh would be a loan for the buying of the investment property that you rent out. It may otherwise be to refinance a buy to let property that you already own in Edinburgh.
You can sometimes get one even if you don’t own your main residence yet, but you will need to have enough money saved up to pay the deposit and other costs associated with buying the property before the mortgage is approved.
The maximum amount you can borrow depends on the lender but the most common minimum deposit is 25%.
This figure changes so speak to a mortgage adviser who can confirm what you would need to put down as a deposit.
How much can I borrow for my buy to let mortgages in Edinburgh?
The amount you can borrow for a buy to let mortgage is linked to the rental income that your tenant in Edinburgh would pay you and the value of the property. Lenders use a ‘stress test’ for the rental income which is based on a percentage calculation which your mortgage adviser will take into consideration when making a recommendation to you.
A common maximum amount assuming that it passes the stress test is 75% of the property value. For example, if the property was £200,000, this would mean a mortgage of £150,000.
It’s best to ask a qualified mortgage adviser to confirm this.
What are the best areas of Edinburgh to buy a buy to let property in?
Knowing the best areas for a person to buy a buy to let property in Edinburgh is not possible because different people will have different opinions about which areas are best.
There are however some popular places to live in Edinburgh which is a good sign when you’re looking for tenants. Some of the most popular areas include Leith, Stockbridge and Bruntsfield. Here is a bit of information about each place.
Leith
Leith is to the north of Edinburgh, Scotland, at the mouth of the Water of Leith. The earliest historical records for the area are from the 1100s when it was known as “Inverleith”. The name “Leith” comes from the Middle English for “port, landing place”.
In the late 1700s, the economy of Leith was based on the tobacco trade. The area was also home to a large number of breweries, most of which no longer exist.
Leith was incorporated into Edinburgh in 1920, and since then has undergone huge regeneration. The Leith Shipyards, which built many of the world’s most iconic ships, including the Queen Mary and Queen Elizabeth, closed down in the 1980s.
The docks themselves are now a popular leisure area, with several bars and restaurants. The area is also home to art galleries, museums and music venues. The annual Leith Festival is a major event and the area is also home to the Royal Yacht Britannia.
Stockbridge
Stockbridge is a suburb of Edinburgh, located to the north of the New Town.
The name is Scots stock brig from Anglic stock brycg, meaning a timber bridge. It was originally a small rural hamlet located on the Water of Leith.
Stockbridge was previously located within the county of Midlothian. In 1996, it became part of the City of Edinburgh council area.
It is a wealthy area, with a high proportion of professional residents. It is also home to several independent shops, restaurants and bars, making it a popular location for visitors to Edinburgh.
Stockbridge is well-connected to the rest of the city, with great bus and train links which may be good news to tenants that need to commute.
Bruntsfield
Bruntsfield is a large neighbourhood in the city of Edinburgh. It is located to the south of the city centre, between the Meadows and Bruntsfield Links.
The name comes from the Scots word “burnstane”, meaning “stone of the stream”.
The area is well-served by public transport, with several bus routes running through the area and a railway station located nearby.
There are many local shops and businesses, as well as a selection of swanky restaurants and cafes.
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Can I change my buy to let mortgage in Edinburgh to a residential one if I want to live in the property?
Buy to let mortgages cannot be used for residential status by the owner of their immediate family, but must be converted to either a regulated buy to let or a standard residential mortgage should the owner/ family want to live there. This post gives you more information on this: Can I Change My Buy To Let Mortgage To Residential?
A qualified mortgage broker can help you remortgage your buy to let property to a residential mortgage if you qualify but this will be linked to personal income and more. Residential rates are generally lower, and fixed rates offer stability.
What are the main lender requirements to get my buy to let mortgage in Edinburgh?
The key lender requirements for a buy to let mortgage are:
Income/Affordability
Most lenders will want to see that your income is enough to pay the mortgage and other associated costs if the property was untenanted, so they will ask you to provide evidence of your income. Different lenders have different rules on this.
Deposit
Buy to let mortgages usually require a larger deposit than residential mortgages do, so you will need to save up some money before purchasing your property – most often a minimum of 25% whereas residential mortgages can be obtained with as little as 5% down.
Borrower Status
Some lenders only accept applicants who are over 21 years old and have been employed full time for at least two years. Additionally, some lenders only accept UK based borrowers. This changes lender to lender though so not always the case.
A mortgage adviser will know this inside out and would be able to discuss lender requirements in full.
Does your salary matter for a buy to let mortgage in Edinburgh?
Yes, your salary generally matters for a buy to let mortgage with most lenders but not all of them.
As a landlord, you’re going to need to be able to pay your mortgage and cover the costs of maintenance and repairs on your property which can be expensive. You also need to have money left over for all the other expenses that come with being a landlord, one main one being tax. That’s why having enough income coming into your bank account is important for the lender to be comfortable when underwriting your application.
If you’re looking for a buy to let mortgage for your investment property in Edinburgh, make sure you understand what lenders will look at when they assess whether they’ll lend you the money or not.
The best way to do this is by speaking with a professional mortgage adviser.
Is the housing market good in Edinburgh?
Over the long term, Edinburgh has remained a stable location to have your money invested. With it being Scotland’s capital city and packed with history, it means millions of tourists visit Edinburgh each year.
With a huge number of employers in Edinburgh and good transport links around the city, Edinburgh has remained in demand with both first-time buyers and people moving home.
Edinburgh has consistently been ranked as one of the best places to live in the world, so it has been seen as a good place to invest in property.
There is a large variety of properties available, from flats to houses, and there is a good selection of schools and amenities.
When looking for a property in Edinburgh, websites such as Rightmove, Zoopla and On The Market are great places to start.
If you are interested in the holiday let market you may require Holiday Let Mortgages in Scotland. When letting out their properties in scotland many landlords choose to use Airbnb.
What are the best schools to be near to when buying our first home in Edinburgh?
Many tenants may pick a location to rent based on the quality of the local schools.
There are several good schools in Edinburgh. However, it depends on the child’s needs and preferences as to which would be the best fit. Some parents prefer smaller schools while others like large ones. Some parents prefer schools with a traditional curriculum while others choose schools with a more progressive approach.
The schools known to be of a high standard in Edinburgh however include:
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What should I be aware of when buying a property in Edinburgh?
When buying a property, it’s prudent to know what potential issues you may face in a location.
There are some things to be aware of when buying a buy to let property in Edinburgh.
The market in Edinburgh can be quite competitive, so you may need to move quickly if you find a property you like.
The city is quite hilly so it may be worth considering a flat or a property closer to the city centre as this may be more attractive to tenants.
Furthermore, Edinburgh can be quite a crowded city, so if you don’t want too many people around the property, you may want to look outside of the city centre
Would a first-time buyer get a buy to let mortgage to buy their first property in Edinburgh?
It’s possible to get an investment property with a buy to let mortgage as a first-time buyer so a property in Edinburgh to generate a rental income is not out of the question.
Most lenders require you to already own a residential property before they consider you for a buy to let mortgage but not all lenders have this rule.
Your earnings, the amount of your deposit, your credit history and the expected rental income from the property will all be looked at when a lender is assessing whether they can lend to you on a buy to let mortgage.
If you would like I NEED ADVICE to find you an experienced mortgage adviser that could give you bespoke advice about buying an investment property in Edinburgh, please complete the contact form.
I have bad credit. Would I still be able to get a buy to let mortgage in Edinburgh?
Having bad credit on your credit file will not always prevent you from being able to get a buy to let mortgage. Adverse credit is a complex area and there is a lot for a mortgage broker to assess when advising on your options.
For example, they will need to gain an understanding of what bad credit consists of. They would need to know when it happened, the type of bad credit it was (such as bankruptcies, debt management plans, defaults, individual voluntary arrangements and so on) how much money it was for, and if the debts have now been repaid and what the event was that made the bad credit happen the first place.
Your deposit amount, the level of unsecured debts that you have, your income and the expected rental will also be factors determining what you can borrow, and which lenders will consider you.
Your mortgage advisor will get an understanding of the situation to then give you bespoke advice.
To find out more about your credit score, a website such as Check My File can be useful.
I am based in Edinburgh, should my mortgage adviser arrange our buy to let mortgage be too?
You don’t need to be located close to your mortgage broker to get the tailored advice that you need to buy your buy to let property in Edinburgh.
There are a lot of mortgage advisers that give mortgage advice on the phone or by Zoom which can make it more convenient for people that work and may find it hard to attend appointments at the adviser’s office.
However, there are different processes involved in buying property in Scotland compared to other parts of the UK. As a result, it would be recommended to talk with a mortgage adviser that has experience in advising on mortgages in Scotland.
Your mortgage adviser should be regulated by the FCA.
I NEED ADVICE can arrange for an experienced mortgage adviser to call you to discuss your options and give you the bespoke advice that you need.
Conclusion
Most lenders will require you to already own your residential property before they offer you a buy to let mortgage but some lenders don’t have this rule.
Your income, your deposit, your credit history and the rental income from the property will all be looked at when a lender is considering whether they can lend to you on a buy to let mortgage for your property in Edinburgh.
Edinburgh is a wonderful city packed with endless history and culture. It’s popular with both residents and tourists making it a great place for buy to let investors. Property prices overall have been relatively stable there over the years.
If you would like I NEED ADVICE to match you with a qualified, experienced mortgage adviser that can give you tailored advice about buying a buy to let property in Edinburgh, complete the contact form.
They are experienced, which can boost your chances of being approved.
