Embarking on the journey of becoming a landlord is exciting and with the right buy-to-let mortgage, you can turn property investment into a rewarding venture.
This comprehensive guide will navigate you through the essentials of securing and managing a buy-to-let (BTL) mortgage, helping you make informed decisions every step of the way.
In this article, we cover:
Understanding buy-to-let mortgages
Firstly, it's crucial to understand what sets BTL mortgages apart from standard residential mortgages.
So, what is a buy-to-let mortgage?
A BTL mortgage is a loan specifically for those who are buying property as an investment to let out to tenants, and not to live in themselves. It’s different to a residential mortgage, which is used to buy a home for you to live in.
How does a buy-to-let mortgage differ from other mortgages?
Typically, BTL mortgages require a higher deposit than a mortgage for the property you intend to live in. To get a BTL mortgage you usually need a deposit of around 25% of the property's value, and it comes with different age limits and lending criteria. It's important to consult with a mortgage consultant, who can provide tailored advice based on your circumstances and the lender's criteria.
Who can get a buy-to-let mortgage?
The criteria for BTL mortgages tends to be a little stricter than residential. For example, your lender may make it a condition that you already own a property, whether outright or with an outstanding mortgage. You will also need to have a good credit record. You may also have to provide evidence of income, typically around £25,000+ a year. Lenders also have a maximum age requirement, which is usually around 75 years of age.*
Now that we’ve touched on some of the essential aspects of what a BTL mortgage is and who can apply for one, we’ll take a closer look at the main decision points you will have to take action on after deciding to become a landlord.
Choosing the right property
Finding a property that appeals to a broad range of tenants is key to a successful investment. Consider the property's suitability for your target tenant demographic and the potential rental yield. Services like free rental valuations and our Help to Find service can assist in making an informed choice.
Repayment options
Deciding on a repayment method is another significant consideration. You can opt for a capital repayment mortgage, where you pay off the loan over time (including interest), or an interest-only mortgage, where you pay just the interest and need a solid plan to repay the loan at the end of the term. This plan is called a repayment vehicle and you should seek advice from a financial advisor to determine the suitability of your chosen repayment vehicle.† Each repayment method has its benefits and risks, which your mortgage consultant will explain to you.