Buying a property to rent out

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What are Buy-To-Let Mortgages?

Buy-to-let mortgages (BTL), are for landlords who want to buy property in order to rent it out. There are a few key differences when taking out a BTL mortgage compared to regular mortgages as lenders would prefer you not to finance your purchase with a standard residential mortgage. Read on for more information on how BTL mortgages work, how to get one and what this involves. 

How does a buy-to-let mortgage work?

In order to get a buy-to-let mortgage, most borrowers will take out an interest-only mortgage on their chosen property. The rent collected from tenants each month will go towards paying the interest on the loan.

The full amount of the mortgage is then paid at the end of an agreed term usually 25 years or more later from either the sale of the property or refinancing to a new lender.

Repayment methods, however, have recently become a popular alternative to the usual interest-only mortgages. In order to figure out which mortgage type is right for you, please contact one of our mortgage brokers who will provide you with the information you need.

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FAQ

Buy-to-let mortgages are a powerful tool for both seasoned investors and also new landlords who are looking to take their first steps onto the rental property market. 

 

You can get a buy-to-let mortgage if you:

  • Want to invest in houses or flats
  • You earn over £25,000+ a year for most lenders however we have a few lenders where no income is required. 
  • You are within a certain age bracket. As lenders usually have an upper age limit which is around 75 years old, it is important to note when the mortgage will end and how old you will be. We also have access to a few lenders with no upper age limit.
  • You have a good credit record. This will allow you to look more enticing to lenders and help with the deposit amount on your buy-to-let mortgage.

You will need to be able to afford to take and understand the risks of investing in property, including financial provision for any periods without a tenant or any maintenance issues within the rented home.

Lender borrowing amounts differ on a case by case basis. All cases are dependent on your deposit, personal circumstances and rental income. Usually, you are required to earn more in rent every month than you repay on your mortgage. Exactly how much more would depend on whether you are purchasing in your own name or via a limited company, whether you are a basic or higher rate tax payer and how many properties you currently own.

Although usually landlords prefer to invest in cheaper properties than homeowners, buy-to-let mortgages cost more. This is due to the fact that borrowers are more of a risk to lenders than owners.

A larger deposit is needed on a buy-to-let mortgage rather than a residential mortgage, in order to protect the lender in the event of default payments. Therefore deposits for a buy-to-let mortgage are usually at least a minimum of 15% and usually 20 to 25% of the property value.

There are fees that need to be paid on buy-to-let property that will need to be factored into the overall budget. This is crucial when understanding whether or not you are able to afford a buy-to-let mortgage.

These include the following fees:

  • Tax on rental income 
  • Building and landlord’s insurance
  • Maintenance and repairs for the property
  • Stamp Duty Surcharge

How can we help you at Mortgages and Insurers Solutions?

As experienced award winning mortgage advisors who are experts in providing buy-to-let mortgages, we are able to help you find a lender who will meet your criteria in regards to an ideal deposit amount and lowest overall costs. We handle the entire process from start to finish, from sourcing the best product, checking your documentation and profile meets criteria, applying directly online with most lenders, obtaining an agreement in principle within 24hrs of receiving your documentation, dealing with any lender or valuation queries, emailing you a copy of the mortgage offer, ensuring all necessary insurances are in place and liaising with your solicitor to ensure completion takes place at the earliest opportunityWe are in the market everyday so you don’t have to be

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