What is a Buy to Let Mortgage?
A buy to let mortgage is a mortgage product specifically for properties which are being let out. They typically require a larger deposit and have a higher interest rates and arrangement fees than normal mortgages. The amount that you can borrow is usually based on the amount you will be able to let your property out for.
You may consider a buy to let mortgage if you are:
- Purchasing a holiday home which you intend to let out in the future
- Buying a house to let for additional income or investment.
- An accidental landlord and have to resort to letting out the property that you haven’t been able to sell.
Challenges that you may come across when applying for a Buy to Let Mortgage:
When thinking about Buy to Let mortgages you need to know that they require a larger deposit than a normal mortgage, normally between 20-40%
When purchasing a buy to let property there are a number of costs which will be higher than when purchasing a property for you to live in such as a higher mortgage arrangement fees and the extra 3% of stamp duty land tax for additional properties. Use our Stamp duty calculator to work out the likey Cost.
The lender you apply to will need to ensure that your rental income from the property you purchase is enough to cover your mortgage repayments. They will usually expect the rent to be at least 125% of the repayment meaning to qualify for a mortgage with monthly repayments of £500 the achievable rental coverage would need to be £625 a month. Try our yield calculator above.
There are many important things to consider before deciding if an investment or further investment in buy to let is right for you:
- Your property may rise or fall in value
- Buy to let is a long-term investment
- Buy to let investments involve taking a risk
- Your interest rate may rise or fall
Here at Mortgage Squared we have access to a broad range of buy to let products provided by large high street banks as well as smaller banks and building societies and specialist lenders.
We can match your specific financial circumstances with the most suitable deals for you, enabling you to achieve a competitive return from your investment.
Buy to let mortgages can have large fees and higher than average interest rates. A mortgage broker can help you to weigh up the options available to you.
Applying for a mortgage using a broker is quick and easy, we can save you time and stress leaving you free to focus on other aspects of your new investment.