26 Jun Buy to Let Mortgage Quick Guide
Here is a quick buy to let mortgage guide!
If you cannot purchase your investment property outright, then it will be necessary to apply for a mortgage. However, this will need to be a Buy to Let mortgage. A standard or residential mortgage is only suitable when you plan to live in the property.
There are differences between Residential and Buy to Let Mortgages. The main difference is the way mortgage lender calculate affordability levels. In most cases the amount you receive as rent is used to calculate what can be borrowed. However, sometimes lenders can take your personal income into account, but usually this is secondary to the rental income. There are several different factors to consider when you are looking for that perfect mortgage; our guides can help, but we are always available for one to one advice.
What is a buy-to-let mortgage?
Buy to Let mortgages are used when you are looking to buy and rent out your property, rather than when you are buying somewhere you want to live.
Who are buy-to-let mortgages for?
Not everyone can get a BTL mortgage. Mortgage providers will almost always have certain criteria or requirements, and not everyone will qualify for a buy to let mortgage. That said, normally requirements vary considerably and, as a result, it is always worth a call to check out your position. BTL mortgages tend to have slightly higher rates of interest and as a result can be more expensive than a standard residential home buyer mortgage. Equally, you will require a bigger deposit.
How does a buy-to-let mortgage work?
BTL mortgages are normally set up as interest only. As a result, the amount of mortgage you owe does not reduce. Rent received from your property is generally used to pay your monthly interest. The amount of mortgage borrowed will need to be repaid at the end of your mortgage, usually this is achieved by sale of your investment property.
Are buy-to-let mortgages interest-only?
Most buy to let mortgage borrowers prefer to take out an interest only mortgage, mainly because these have lower monthly repayments. Repayment mortgages are also available, and as a result they are becoming a popular alternative, even though repayments may be more.
How much can you borrow
How much you can borrow usually depends on the amount of deposit you have available; your personal circumstances and the amount of rental income being received.
Are buy-to-let mortgages more expensive?
Buy to Let mortgage carry a greater risk, as they’re not secured on the property you live in and rent payments can’t be guaranteed. Because of this buy to let mortgages can cost more. Both higher interest rates and larger deposits are normal.
We also recommend The Money Advice Service if you want more detailed information.