Buy To Let Mortgages

If you’re looking to buy a property with a view to renting it out to tenants, you’ll need a buy-to-let mortgage. Here’s what’s different about them, and what to weigh up before you commit.

What Is a Buy To Let Mortgage?

A buy-to-let mortgage differs from a standard residential mortgage because it’s specifically designed for properties rented out to tenants. These mortgages typically require a larger deposit — generally 25% or more — and often come with higher interest rates, reflecting the increased risk associated with rental properties.

Affordability for a buy-to-let mortgage isn’t based on your personal income; it’s calculated against the monthly rental amount the property is expected to generate. Many BTL lenders have no minimum income requirement, though they typically like to see some form of income, whether employed or self-employed.

What’s the Difference Between a Buy To Let and a Standard Mortgage?

There are a few key points worth understanding before you sign anything. A buy-to-let mortgage is a legal requirement for any house being rented out, and lenders typically ask for a bigger deposit to meet their security criteria. You’ll also usually face a higher rate of interest or higher fees, and you must pay stamp duty on all properties in your investment portfolio. As a result, buy-to-let mortgages tend to be more expensive overall than a traditional residential mortgage.

Why Are Buy To Let Rates Higher?

It comes down to the unpredictability of being a landlord. While you’d expect monthly rental payments to cover the mortgage debt, complications with tenants can arise — void periods, arrears, and so on. Lenders ask for extra protection to account for that risk, which is reflected in the rate.

How Do I Pay Off a Buy To Let Mortgage?

If you choose a capital repayment mortgage, you’ll make monthly repayments covering both the amount borrowed and the interest. On an interest-only mortgage, you’ll pay only the (much smaller) monthly interest, with the full loan amount due at the end of the term — typically repaid by selling the property.

How Big a Deposit Do I Need?

The minimum deposit is generally 25% of the property’s value, though in some cases lenders may ask for as much as 40%. Speak to one of our advisors to find out what deposit size would apply in your circumstances.

What Types of Buy To Let Mortgage Are There?

There are two main types of buy-to-let (BTL) mortgage:

• Tracker mortgages — the rate is linked to the Bank of England base rate, with the lender adding a static rate on top. If the base rate rises or falls, your mortgage payment moves by the same percentage.
• Fixed-rate mortgages — you pay a fixed rate for the duration of the deal, usually 2–10 years, so your payments stay the same throughout that period.

Why Get a Buy To Let Mortgage?

If you’re looking to invest in a rental property without buying outright, a buy-to-let mortgage is essential. If you have positive equity, you’ll make money even if you eventually sell to clear the debt. A larger deposit combined with interest-only payments also tends to mean lower monthly costs than a traditional residential loan, which helps if the property sits empty at any point.

As long as you have a good credit rating, you should be eligible. Get in touch today and we’ll help find the right buy-to-let mortgage deal for you.

Please note: some types of buy-to-let mortgage are not regulated by the FCA.