How To Guide: Buy To Let Mortgages Explained

People Inside a Kitchen

Buy-to-let properties can be a great investment. Buying a house to rent out may mean an ongoing passive income stream that could change your life. Typically, when you are buying rental property that is an investment instead of just your home, though, you can’t use the kinds of loans most people use. Instead, you typically have to look for a specialist kind of mortgage loan, which is usually called a buy-to-let mortgage but is sometimes referred to as a BTL mortgage. Fortunately, there are lots of great deals out there on a mortgage that is bought to let whether this is the first time you’ve ever considered becoming a landlord, you became a landlord accidentally, or you’ve been a landlord forever. The bad part of that, though, is that there are several rules around buy-to-let mortgages with which you may or may not be familiar, and those UK buy-to-let rules can be difficult to navigate. This quick guide, though, can help you better understand buy-to-let mortgage deals.

How do Buy to Let Mortgages Work?

What is a buy-to-let mortgage? How do they even work? If you’re unfamiliar with buy-to-let mortgages, you need to understand them before you invest in one. You sometimes see this called buy-to-let mortgage interest-only. In an interest-only buy-to-let mortgage, for every month that you pay, you just pay the interest itself. You don’t pay down the capital with buy-to-let, meaning you have lower payments. This is great initially because you can minimise how much you’re actually spending on the property’s mortgage to let. It also has some downsides, though, because once you reach the end of the term on this type of landlord mortgage, you have to pay the full amount of the owned mortgage or refinance into a different kind of mortgage to let.

How to Get a Buy-to-Let Mortgage

Buy-to-let mortgage criteria tend to vary from lender to lender. To qualify for a buy-to-let mortgage, you’ll need to have a good credit record. You’ll want to be sure that any other borrowings you haven’t stretched your budget too much. You’ll also need some evidence of employment income. Most lenders won’t loan to you if you’re more than 75 years of age. In most cases, lenders will also look at your current portfolio as well as whether you’ve ever had a buy-to-let loan in the past and whether you were able to repay it or if you had to refinance it at the end of the term.

Affordability tests are quite strict for landlords when it comes to a mortgage for rental property. UK mortgage affordability rules along with the stiff to-let market getting so tight have resulted in these tougher regulations. One affordability test you’ll have to pass with regulated buy-to-let mortgages is the ICR, or interest cover ratio, to understand how much profit you might actually make on the home you’re considering buying. Most banks are looking for you to cover at least 125% of your mortgage payments with the ICR, but some lenders demand you cover 145% of your tenants’ rent.

Additionally, you’ll need a fairly large buy-to-let mortgage deposit, or at least fairly large in the world of traditional mortgages. How much deposit for a buy-to-let mortgage is required? Most providers who offer buy-to-let mortgages want you to have a deposit for a buy-to-let mortgage that is at least 20 – 25% of the total home value. How much deposit for a buy-to-let mortgage, though, can vary from lender to lender. The bigger the deposit you can place on the home, the better the overall rate you might end up getting. The best deals are usually available to investors who have a deposit of at least 40% of the value of the mortgage.

Can first-time buyers buy to let? If you’re worried because you’re a first-time buyer trying to break into the buy-to-let market as a business opportunity, you shouldn’t be. You can get a buy-to-let mortgage, first-time buyer or not. You may need a fairly large investment if you’re going to try to get a good deal on a first-time buyer buy-to-let mortgage, but you can certainly get one. Just don’t expect to get the benefits that come to first-time buyers with buy-to-let mortgages for first-time buyers, like the stamp duty forgiveness. You’re only eligible for that for a home that you’re going to live in. Despite that fact, you won’t pay quite as much because you’ll be charged the home move rate. Just remember that when you go to buy a house for yourself, you may have to get a second home mortgage because you already have a buy-to-rent mortgage on the books. Fortunately, though, you may not have to pay standard buy to let deposit rates on the new purchase.

What Are the Best Buy to Let Mortgage Products?

There are many different ways to compare buy-to-let mortgages so you can be sure you’re getting the best deal. As you work to create a buy-to-let mortgage comparison, understand that the most important part of the process is to look at the overall cost of the loan. You may see incredibly cheap buy-to-let mortgage rates, but if there are high fees attached, the cheap initial buy-to-let mortgage rates aren’t worth it. Keep in mind, too, that you’ll want to look at those upfront fees and try to compare the best buy-to-let mortgages in an apples-to-apples format for each buy-to-let mortgage company. The best buy-to-let rates tend to be higher than you might see with a residential mortgage. Often landlords will end up paying something like £2,000 in fees. While some lenders charge set fees, others expect you to pay a percentage of the overall amount you’re borrowing like 0.5% of the loan or something similar. Most people look primarily to BTL mortgage rates and overall fees to understand the buy-to-let mortgage best banks, but you may also want to talk to other landlords to learn which banks have the best products. It may also be worthwhile to work with a broker to compare many different products at one time. You can typically compare buy-to-let mortgage rates UK lenders are offering from their websites or other online comparison tools, though you can’t always see the fees involved from those tools. The best buy-to-let mortgages, ultimately, are the ones that make sense for your budget. Ask yourself, will rent cover my mortgage? If the answer is no, this may not be the best product for you. Eventually, the rent will be mortgage payments, so you need to be sure there’s enough there to make it work for you.

Can You Get a Buy-to-Let Mortgage in the UK Later?

Wondering about the answer to “Can I change my mortgage to buy to let?” If you didn’t get a buy-to-let mortgage at the outset of your property purchase or you just think it might be a good idea to refinance the one you got, know that it is possible to get BTL mortgages after the fact. Lenders actually love to make these kinds of loans, and often they will offer cash back or even cut their upfront fees as a whole to help attract landlords to these kinds of loans.

Moreover, if you became a landlord by accident because you inherited a property or your circumstances changed, you can switch over. Not all lenders will grant you consent to let, but it is possible. Just talk to your lender to learn more about changing a mortgage to buy to let.

What Is a Buy-to-Let Mortgage Term?

Most buy-to-let mortgages are between two and five years. If you need a buy-to-let remortgage after your initial term is up, that’s possible too. If you choose to remortgage a buy-to-let property, you can usually even use the same lender to do so. When you remortgage a buy-to-let property, you can expect to structure it into a very different kind of term, often something resembling a more traditional, longer mortgage.

Are Buy-to-Let Mortgages Available Across the UK?

You can get a buy-to-let mortgage almost anywhere in the UK. Whether you’re looking for a buy-to-let mortgage in Scotland, a buy-to-let mortgage in Northern Ireland, or somewhere else, most lenders make them at any UK lending institution. You simply have to look at banks and other lenders where your property is located to find one who will work with you. As long as the buy-to-let LTV looks good to a lender, they’ll typically loan the money, no matter where in the UK your investment is located.

Can a Company Get a Buy to Let Mortgage?

Thanks to some cuts to the mortgage interest rates in various tax relief bills and the new wear and tear allowance, many landlords have decided to set up a company structure to help manage their business buy-to-let mortgage products, and work with a business buy-to-let mortgage can be a fairly profitable way to do business. While the number of landlords doing this makes up a small percentage of the market as a whole, the number of landlords choosing to do so is going up significantly. This may not be the right decision for you, but on the whole, lenders who are working with a company looking to get a buy-to-let mortgage usually will still offer you this kind of loan if you move to a company structure. The interest rates, however, can be a bit higher than they are for individual landlords.

It’s important to note that you won’t even want to consider this move until you’re ready to get a buy-to-let mortgage for a second home. It does little good to move into the company structure if you have a single property.

If you do move to a company structure and you have four or more properties, most banks will consider you to be a portfolio landlord, and lending requirements are even stricter in this sector. In the past, portfolio landlords just had to show their overall profit and loss figures, but now you have to show the mortgage details for every single property you own as well as the cash flow projections for each. If you have several mortgages on each property, the regulations can make it a bit tougher to get another mortgage. You may also face higher buy-to-let mortgage rates. You’ll want to compare BTL mortgage rates to find the right one to meet your needs.

Getting the Right Product for You

Before you invest in the first buy-to-let mortgage you see, be sure you do an extensive buy-to-let mortgage comparison. Mortgage rates on buy-to-let properties vary considerably, but so do the fees involved. You can usually use an interest-only buy-to-let mortgage calculator to help you decide. Buy-to-let mortgage rates UK lenders charge are different, but these tools can help you decide what’s right for you. If you do decide to let property, this is the single best kind of loan to get, though it may end up being tougher to qualify for than a traditional mortgage.


What is the Deposit for Buy to Let Mortgages?

Buy-to-let mortgages UK lenders make typically come with a required deposit of at least 20%. The buy-to-let scheme means a higher deposit amount because the initial payments are so low. If you’re still asking yourself “how much deposit do I need to buy to let?” it may be best to talk to a lender.

Is a Buy to Rent Mortgage and a But Let Mortgage the Same Thing?

A Buy to Let mortgage is the same thing as a buy-to-rent mortgage. They just go by different names.

What is the Current Buy to Let Interest Rates?

Current rates vary from lender to lender, but they’re usually widely publicised. It’s important to note, though, that the buy-to-let mortgage rate changes the same way any other rate does. Typically, you’ll find the best BTL mortgage rates when you work with a broker. Often just following the Buy to Let news will help you better understand the current interest rates of this kind of loan. Typically, if you’re looking for the latest rates, you’ll want to look at the 10-year buy-to-let mortgage rates, as they’ll give you the best picture of the market as a whole.

Is a Buy to Sell Mortgage the Same as a Buy to Let in the UK?

A buy-to-sell mortgage is a different option. It’s usually made for people who plan to flip their homes. Buy-to-let mortgages, though, were made for those who wish to become landlords. It’s also known as consent to let mortgage. No matter what you call it, though, it’s just a good way to buy a rental property.

What is a Rent to Buy Mortgage?

This type of mortgage is made for tenants who want to rent their home, but have at least a portion of that rent go to the value of the property.

How Many Buy-to-Let Mortgages Can I Have?

A consumer buy-to-let mortgage is designed to buy a rental property. Ask yourself how many mortgages can I have. It depends on your financial stability and your lender. As you work to decide what’s right, don’t forget to consider the overall cost of buy-to-let mortgage interest rates and how that might impact your loan. If you think you have too many, you may want to chat with a financial advisor to determine the right numbers.

How Does a Buy-to-Let Mortgage Work If You Can’t Repay your Loan?

Buy to let rules state that if you can’t repay your loan, you will lose the home. If you can’t currently pay your loan, it may be worth it to look into a BTL remortgage. You could even further compare buy-to-let mortgage rates to help you find a loan you can afford. Buying to let repayment for the mortgage can get expensive. That’s one reason it’s essential to compare the market for buy-to-let mortgages before you choose one. You want something you can afford for the long term.

What is the Cheapest Buy to Let Mortgage?

The cheapest one is one with a low rate and low fees. Even if you find a cheap buy-to-let mortgage, though, be careful. What deposit for a buy-to-let is required might surprise you, even if the loan itself was fairly cheap. Buy to let mortgages vary in cost, so it’s essential that you shop around.

Where Can I Get Buy to Let Mortgages Explained in Simple Terms?

If you’re left asking yourself how a buy-to-let mortgage work, you may need a bit of extra help. If you need to have a buy-to-let mortgage explained better, it may be best to work with a lender or financial advisor to get the help you need.

What Is a Buy-to-Let Mortgage Really for?

What are buy-to-let mortgages designed to do? Buy-to-let mortgages are designed to help potential property investors get on the property ladder. Buy-to-let mortgage requirements, though, are different from those with traditional mortgages, so be sure you understand them before you sign on the dotted line.

Can I Get a Buy-to-Let Mortgage if I’m Disabled?

Absolutely! You can even get a first-time buy-to-let mortgage if this is the first property you’ve purchased. If you’re a buy-to-let first-time buyer, whether you have other problems or not, you can get this type of loan. The key, though, is to compare buy-to-let mortgages to make sure you’re getting a good deal. Many brokers can help you with a BTL mortgage comparison to make sure you’re getting a great deal. Learning how to buy to let can be difficult, though, so if this is the first time, you’re doing this, do as much research into this type of loan as possible.

What is Buy Let property?

A buy-to-let investment is a home you purchase so you can rent it to tenants. a Buy to Let mortgage then is just an easy way to purchase that property. How does buying to let work? You talk to the bank about a property you want to buy to rent to tenants. Then they discuss your options. You’ll need some capital to invest as well as a steady income, as the bank will want to make sure you can cover the value of the loan each month.

How Can You Make More Money from Tenants to Cover Your Buy to Let Loan?

There are many ways you could make additional money. You could even consider a let’s pay weekly scheme, where your tenants only pay you once a week, but the rent is a bit higher if they work things out that way. Talk to a financial advisor about the best (and legal) way to increase tenant rent.

Are Buy-to-Let Loans Designed for Buying a Property You Are Currently Renting in the UK?

Getting a buy-to-let mortgage was designed for someone who wants to become a landlord. They’re not designed to help you buy a property that you’re a tenant in at the moment.

Is This Designed to be a Mortgage on Second Homes?

If you’re looking for a mortgage for a second home, you may want to look for a different type of loan, as these have fairly strict terms. How much deposit for a buy-to-let is required would scare you off from this kind of loan anyway. Talk to your lender or financial advisor if you’re looking for a second home mortgage.

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