A Buy to Let mortgage is for people looking to buy a property to rent out, rather than live in it. The rules around buy-to-let mortgages are similar to those around regular mortgages, but there are some key differences.
Buy-to-let mortgages are a lot like ordinary mortgages, but with some key differences.
- The fees tend to be much higher.
- Interest rates on buy-to-let mortgages are usually higher.
- The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%).
- Most BTL mortgages are interest-only. This means you pay the interest each month, but not the capital amount. At the end of the mortgage term, you repay the original loan in full. BTL mortgages are also available on a repayment basis.
- Most BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA). There are exceptions, for example, if you wish to let the property to a close family member (e.g. spouse, civil partner, child, grandparent, parent or sibling). These are often referred to as a consumer buy-to-let mortgages and are assessed according to the same strict affordability rules as a residential mortgage.
Advising, arranging, lending and administering BTL mortgages for consumers is covered under the same laws as residential mortgages and is regulated by the Financial Conduct Authority (FCA)
How much you can borrow for a Buy to Let property will depend on how much rent you expect to get. Most lenders will want to see a rental income of 25% to 30% over and above your monthly repayments.
To find out what your rent might be, talk to local letting agents, or check rental listings online to find out how much similar properties are rented for.
For more information on Buy to Let mortgages call Asset Harbour on 01276 986333 today.