What is a Buy to Let mortgage?
A Buy to Let property (sometimes referred to as Buy to Rent, Landlord Mortgage or just BTL) is a type of property investment, in which the investor becomes a landlord and rents out the property for profit.
Like any form of investment, you will need help and advice before you consider your options as there is a to understand before parting with your money, we need to get it right first time! We are here to help explain Buy to Let mortgages in a simple way, so if you’re a first time buyer of a Buy to Let property, we can help you get the ball rolling.
Do I need a Buy to Let mortgage to rent out a property?
Yes, although some lenders will allow you a consent to let on your current property. Most of the time you will require a special type of mortgage based on the fact that you or a close family member will not be the permanent resident of the property. Unlike a residential mortgage, where how much you can borrow is based on your own income (among other things), a Buy to Let mortgage is assessed mainly on how much rent the property can generate.
How much could I borrow on a Buy to Let mortgage?
Unlike a residential mortgage, where the amount you can borrow is based on your salary and your outgoings, a Buy to Let mortgage is assessed on the rental income that the property is likely to generate. Lenders will typically need the rental income to be at least 125% of the monthly mortgage payments (on an interest only basis), or even up to 145%, depending on a lender’s criteria.
In some cases proof of income is not required so house persons and retired persons can benefit from this kind of investment.
It’s common for the interest rates on buy-to-let mortgages to be higher than residential mortgage rates.
Deposit and property value
The minimum deposit you need to put down for a Buy to Let mortgage is higher than it is for a normal residential loan. Typically, you will be required to cover at least 25% of the property value yourself on a BTL mortgage but in some cases with some lenders you are only required to provide as little as 15% of the property value.
Thinking about renting out your current home?
If you’re moving home, you may be interested in keeping your current home and transforming it into a property to let – a process sometimes referred to as Let to Buy ( as previously mentioned you could request a consent to let form your current lender, they may not agree )
If you decide to move out of the property you’re currently living in and intend to rent it out, you’ll need a Buy to Let mortgage. A lot of people find this a fantastic , cost effective way of raising capital to buy their onward purchase.
One thing to remember is to ensure certain things are in place like buildings and possibly landlords insurance, as normal policies don’t cover rental properties.
We at the mortgage hub pride ourselves on our exceptional knowledge of the industry and lenders for our portfolio landlords as the majority of BTL Lenders will deem portfolio lending as a speciality. We help hundreds of portfolio investors daily and help maintain the portfolio to save them money across the board from lower rates to capital raising for portfolio expansion.
Can we help
Are you thinking of buying your first Buy to Let property, or adding to your current portfolio? Do you already have a Buy to Let mortgage and are looking to switch to a better deal? Contact us today.
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The Financial Conduct Authority do not regulate buy to let mortgages.