Buy-to-Let Mortgages

Buy-to-let mortgages are for people who want to buy a property specifically for renting (‘letting’) it out.

If you have a standard mortgage on your current home now, then you can swap this to a Buy-To-Let mortgage. This lets you to move to another property but keep and let out your existing property.

Some lenders also call this a ‘Let-To-Buy’.

Mortgages for Landlords

A good credit record along with a salary of at least £25,000 a year is helpful and will give you access to the majority of the Buy-To-Let mortgage market. However, small amounts of adverse credit and earnings of less than £25,000 a year can still be acceptable to some lenders, but at a potentially increased cost.

Consumer Buy-To-Let mortgages

Since March 2016, Buy-To-Let mortgages come under two different types:

  • Consumer Buy-To-Let mortgages – This is when a property you own has become a rental property. This could be an inherited property, one given to you or is one that you used to live in (and still own) but now rent out. Most consumer Buy-To-Let landlords will only have one property like this. Consumer Buy-To-Let mortgages are regulated and supervised by the Financial Conduct Authority (FCA).
  • Business Buy-To-Let mortgages – These are mortgages purely for professional landlords and are not covered or supervised by the FCA.

Bower offer expert help and advice for both types of these mortgages, just get in touch with us now to find out more.

How Buy-To-Let mortgages differ from standard mortgages

As a Buy-To-Let mortgage is for purchasing a property that you’ll be letting out, your choice of lenders will be greatly reduced if you don’t already own your own home.

This is because these mortgages differ from standard mortgages in the following ways:

Interest rates are increased

The interest rates on Buy-To-Let mortgages are usually higher as lenders feel the level of risk is greater. Tenants rarely maintain your property to the same standard they would if they were the owner-occupiers. There may also be times when the rental income does not cover the mortgage payments, or when you have periods of vacancy between tenants.

That said, there is insurance available to cover this.

Higher minimum deposit

Lenders prefer it if you to have a larger personal stake in a Buy-To-Let property as it reduces their risk. A minimum of 25% is often required, although many of the best deals want up to 40%. There are lenders out there who require only a 20% deposit, but in these cases the lender will increase the interest rate charged and arrangement fee, due to the higher risk.

Further age restrictions

Most banks and building societies insist on a minimum personal age for Buy-To-Let of 21. Each lender will have their own upper age limits too, usually between 70 or 75, although this is your age when the mortgage ends, not when it starts. For example, if you’re 50 when you take out a 20-year mortgage it will finish when you’re 70.

But there are some lenders who do not have an upper age limit for when the mortgage needs to be repaid.

Interest only

Most Buy-To-Let loans are interest-only, not repayment. So just like a standard interest-only mortgage, you only pay the interest each month and have to clear the capital debt at the end of the mortgage term. This may mean that the property will need to be sold.

Just get in touch with the mortgage experts at Bower to find out more and see how we can help get the right mortgage for you