What is a Buy To Let mortgage?

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A buy to let mortgage is for a property you plan to rent out for profit. It’s important to understand that you cannot live in a property that has a buy to let mortgage or indeed rent out a property that has a residential mortgage. Although in some circumstances, only agreed
by prior consent with your mortgage lender, can a residential property be let. It is against the mortgage deed conditions to do so without consent, and could mean you are in breach of your contract and your home could be repossessed.

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A lenders deposit requirement for a buy to let property is usually much higher and start at 20%- 25%.

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How much you can borrow to purchase your investment property will depend on certain criteria being met for example:

• The monthly rental income the chosen property will yield.

• Your affordability to repay the mortgage should you have a gap in tenancy.

• Meet lenders minimum salary criteria

• Duration of the mortgage term.

• Cost of your current residential property and monthly commitments.

 

It’s important to consider how you will repay the mortgage at the end of the term – there are several ways in which you can do this.

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Interest only

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This means that the initial mortgage amount you borrow will not decrease with every monthly payment you make, You are only ever paying the interest on the nominal amount.

Simply if you chose to borrow £100,000 for 20 years, in 20 years time you would still owe the lender £100,000. You can either choose to sell the property and repay the mortgage at the end of the term or put a savings provision in place that will total the mortgage amount at the end of the term so that you can repay the mortgage and keep the property.

Monthly payments are usually much lower with an interest only mortgage and would mean you could take advantage of any surplus rental income as profit.

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Repayment

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A repayment buy to let mortgage means that every month you repay interest and some of the mortgage amount so at the end of the term you will have repaid the mortgage to lender in it’s entirety. This means however, the monthly repayments are higher compared to the interest only method, this repayment type is usually used if the investment property is a retirement plan.

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If you already own buy to let properties and wish to increase your portfolio Zehra is on hand with a wealth of expertise to help you find the best deals available as some lenders have buy to let portfolio criteria you will need to meet depending on how many properties you currently own.

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Alternatively there are some lenders that will consider lending on a buy to let property even if you are first time buyer This can be a great way to invest to provide a monthly income if you happen to have a lump sum for a deposit. Speak to us today to talk about your options.

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*Not all Buy to Let mortgages are regulated by the Financial Conduct Authority.

Your home/property may be repossessed if you do not keep up with your repayments.