Buy to Let (BTL) Mortgage

Buy to Let mortgages are for use by those wanting to invest in property with the purpose of renting it out to someone else, thereby becoming a landlord with paying tenants.

You cannot take out a standard residential mortgage under such circumstances, but BTL specific mortgages allow you the opportunity to purchase property, without having to buy it outright.

The amount you can borrow depends on how much potential income lenders think you can achieve, opposed to your salary as with regular mortgages.

As will all mortgages, certain conditions have to be met and a deposit of at least 25% of the property value is usually required, albeit in some cases you may find a lender willing to loan you the money with 20%. There may also be the requirement of being a homeowner, able to pay off your BTL mortgage before you the age of 75, have a good credit record and be in a position to maintain and keep the property in a good state of repair.

You will need to make sure you charge sufficient rent to cover your mortgage repayment along with any additional costs (repairs, letting agent fees, etc) but if you are looking to invest in property, the likelihood is you are also hoping to make a profit too. In which case, you will want to make sure the monthly rental allows you to keep some money from the rent for yourself too.

If the market is in your favour, you can hopefully make money should you decide to sell the property and do so for more than you paid for it - Capital growth.

When discussing your requirements, we can help you determine which type of Buy to Let mortgage is best suited to you - fixed, variable, tracker, discount or capped interest rate – and how to decide between them.

However, most are interest only which means the monthly repayment only cover the interest owned, not the amount borrowed. This would be paid when you sell the property for find alternative means to clear to debt.

A repayment mortgages cost more per month but would settle the entire amount owed by the end of the term – usually around 25 years - meaning you can either keep the property and continue to rent it out, keeping all of the rental income for yourself, or sell it and keep the full sale amount.

If Buy to Let is something you are considering, remember to factor in costs outside of the mortgage – renovations and improvements, making the property legally safe to live in, letting agent fees and advertising, maintenance and repairs, etc, etc.

Also remember that you will pay tax on the profit you make from – income tax on rental income and capital gains tax on any profit you make from selling the property.

We can talk you through the various requirements of a BTL mortgage – they vary from lender to lender – along with an idea of how much you are likely to be able to borrow.