Buy-to-let mortgages allow landlords to borrow money in order to purchase property with the specific purpose of letting it out.
Buy-to-let mortgages work in the same way as a standard mortgage, however as part of the underwriting process the lender will normally want to establish the potential rental income to be received when considering whether they will grant a mortgage and the amount they are willing to lend.
A first time landlord may be required to have a separate annual income of at least £25,000 whereas when the mortgage is for an owner occupied property, the calculation is usually a multiple of the borrowers annual income.
Buy-to-let mortgages are in many ways just like ordinary mortgages, but with three key differences:
- Interest rates on buy-to-let mortgages tend to be higher to reflect the risk posed by the applicant not living in the property.
- The minimum deposit for a buy-to-let mortgage is typically a quarter (25%) of the property’s value (some lenders offer deals with a 20% deposit, others require a 40% deposit).
- The setting up i.e. arrangement fees tend to be higher than those applied on a residential mortgage.
Buy-to-let mortgages are more often than not arranged on an interest only lending basis meaning you only pay the interest on the loan and the capital balance will still remain at the end of the mortgage term.
If you’re interested in buying a property to let out we will talk to you to ensure you have all the relevant information you need to allow you to make an informed decision and proceed to the next step of purchasing a rental property. Alternatively, if you are an existing landlord with a buy-to-let mortgage we will complete a review to ensure you are on the best deal available to you.
For a FREE initial mortgage meeting please give us a call.