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  • Writer's pictureAlastair Hoyne

Guides - What is a Buy To Let Mortgage?

If you’re planning on purchasing a property to let and require the funds to do so you’ll need a buy-to-let (BTL) mortgage. Provided the property can be let and the rent is paid, buying to let can provide landlords with rental income along with asset appreciation if house prices rise.

A mortgage for buying a property to let is similar to a mortgage for buying a home to live in, but there are key differences, including larger deposits of at least 25% of the value of the property and higher interest rates.

Buy-to-let mortgage deals vary and there are a number of different types. Fixed rate mortgages allow landlords to budget effectively. Variable or tracker mortgages, which fluctuate can sometimes be cheaper, when interest rates are dropping. If you expect interest rates to rise, locking in a fixed rate could be a safer option.

Banks, building societies and specialist lenders have their own criteria for buy-to-let mortgages. Generally you’ll be subject to:

  • Minimum or maximum age restrictions

  • A minimum annual gross income of £25,000, although some lenders go as low as £18,000

  • A limit on the number of buy-to-let mortgages you can have with that specific lender

  • A limit on the total amount that that they will lend to you

  • Affordability checks of borrower’s costs (including tax liabilities), credit history and balances, verified personal income and possible future interest rate increases

Interest Rates vary widely, but at present they start from 1.5% per year for a

standard BTL bought by an individual to 2.5% for a limited company, increasing to

3.5% for a House in Multiple Occupancy (HMO) or Holiday Let and higher again for

portfolio loans on multi unit freehold/leasehold blocks (MUFB/MULB).

There are specialist Buy To Let Mortgages for Holiday Lets, Serviced Apartments and HMOs.

Most BTL borrowers prefer to take out interest-only mortgages because it

means lower outgoings. As you only pay interest, you’ll need to repay the full value of your mortgage at the end of the term. Repayment mortgages are also available.

With over 199 lenders - with Finanze®, it’s personal. Providing bespoke solutions for bridging, buy to let, development finance, residential and commercial mortgages for private and corporate clients.

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The topics covered in articles are complex and do not substitute the need for financial, legal, accounting, tax and other advice before making any decisions or taking any action based on information in articles.

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