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Please be aware if opting for interest only, the mortgage balance will need to be paid at the end of the term. Consideration should be made as to how this will be done. Options could include investments, savings or sale of property.
Your home may be repossessed if you do not keep up repayments on your mortgage. Most Buy-to-Let mortgages are not regulated by the Financial Conduct Authority.
FAQ
WHAT IS A BUY-TO-LET MORTGAGE?
A buy-to-let (BTL) mortgage is specifically for landlords who want to rent their property out.
Generally, it works like a regular mortgage but the eligibility criteria and requirements might be different. You will need to apply for a buy to let mortgage in the same way you would for a residential mortgage.
With a BTL mortgage, you can choose to have an interest only mortgage or a repayment mortgage.
If you have an interest only BTL mortgage, your monthly payments, will only cover the interest and at the end of your mortgage term you will still need to pay the lender the original mortgage amount.
Some landlords will take opt for an interest only mortgage to keep their monthly repayments low and manageable for when the property may be vacant.
A repayment BTL mortgage is where your repayments cover the whole amount, including interest.
At the end of the mortgage term, the property is paid for and you own it outright. This means your repayments are usually higher.
HOW DO BUY-TO-LET MORTGAGES WORK?
BTL mortgages differ from residential mortgages in that:
- Your income does not determine how much you can borrow
- Deposit required are usually higher
- Purchase related costs are higher
- The amount being borrowed is based primarily on the rent the property will generate on a monthly basis
The mortgage you take out will either be a repayment mortgage or interest only. Most people tend to take out an interest only mortgage so payments are kept to a minimum.
- You make monthly repayments over an agreed period of time.
HOW CAN I GET A BUY-TO-LET MORTGAGE?
A mortgage broker will be able to take you through the process and outline the exact requirements you will need in order to apply for a buy-to-let mortgage.
HOW MUCH DEPOSIT DOES A BUY-TO-LET MORTGAGE NEED?
Deposits for BTL mortgages tend to be higher than regular ones. According to the Money Advice Service, it’s around 25% of the total mortgage.
HOW MUCH CAN YOU BORROW IN A BUY-TO-LET MORTGAGE?
The amount you will be able to borrow with a buy-to-let mortgage will depend on the rental income you will receive.
WILL I NEED LANDLORD’S INSURANCE TO GET A BUY-TO-LET MORTGAGE?
In order to get a buy-to-let mortgage, there is no need to get landlords insurance. However, it is definitely worth considering, depending on the cover you purchase, it will protect you for accidental damage, loss of rent and other factors too. Public liability.