Buy To Let Mortgage
What is a Buy-to-Let Mortgage?
Buy-to-Let mortgages are a type of mortgage for those who are looking to buy a property, typically a house or flat, for the purposes of then renting that property out.
In many ways a buy-to-let mortgage will work in the same way as a standard kind of mortgage; albeit with a number of key differentials. These differences tend to be around the areas of interest, deposits and fees – all of which have a tendency to be higher than a standard mortgage for residential / private purchase.
Who Are Buy-to-Let Mortgages For?
These mortgages are for anyone looking to purchase property for the purposes of long-term investment.
For instance, if you’re purchasing a house which you plan to rent out as accommodation on the lettings market then a buy-to-let mortgage is the type of lending you would typically look to acquire.
Generally, to take on a buy-to-let mortgage you will already be a home or property owner and with a good credit rating. As with all types of loan, lenders would look to the applicant having an income and related circumstances to indicate that they are in a financial position to make the monthly payments.
A typical BTL mortgage would be taken out on an interest-only basis, meaning that you only pay the interest on the loan rather than any repayments on the property itself. Whilst this means that monthly payments are less, applicants must be aware that they will need to repay the entire cost of the capital in full.
How Much Can You Borrow?
The amount you can borrow from the lender will be linked to the level of rent you would expect to receive on the property (as a rule one would expect this to be 25-30% higher than your mortgage payments).
Research of the letting market in the area in which you intend to buy would give you an indication of what levels of finance you might need.
As with all loans, there is a risk attached to a BTL mortgage. You need to ensure you have the facility to make payments even when you don’t have rental income or if the value of the property declines.
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