How Do Buy To Let Mortgages Work?
A buy-to-let mortgage* is designed for investors purchasing a property to rent out. These types of mortgages are typically offered by specialist lenders and often come with higher interest rates and larger deposit requirements compared to residential mortgages intended for owner-occupied properties. The higher interest rates are to reflect the higher risk to lenders associated with tenants who also have rights.
When assessing the loan, lenders take into account the potential rental income. Buy-to-let mortgages are commonly structured as interest-only, meaning the capital balance remains unchanged unless additional payments are made or a repayment mortgage is chosen. Whether you’re a seasoned landlord seeking a better deal or a first-time investor stepping into the market, we’re here to provide expert guidance.
*Please note: Not all mortgage types are regulated by the Financial Conduct Authority.
A buy-to-let mortgage usually requires a larger deposit than a residential mortgage. Typically a deposit from 20% to around 40%. You may also find arrangement fees and interest rates are higher. You will also have to pay more stamp duty or Land Building Transaction Tax (in Scotland). at the second home rate as the property is not your main residence.
If you already have more than one mortgage, especially if they are high loan to value, lenders may be more cautious about lending you more money in case you struggle to repay the debt. Lenders may also require that the rental income is around 20% – 50% or more than your mortgage payments. This is just in case you might have periods where your buy-to-let property is not occupied. Mortgageshield can look at your personal circumstances and source a range of options for you to consider. It is important to not that each lender has its own lending criteria.
No. Not necessarily. This would depend on the lenders own criteria. Some lenders may require you to have a minimum income of around £25,000 especially if you are a first-time landlord.
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