What is a Buy to Let mortgage?

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A buy to let mortgage is when you purchase a property as an investment with the intention of letting it out to tenants instead of a place to live. It is important to note that becoming a landlord is not straight forward and not always an easy way of making money, however when done correctly you will be able to reap lucrative rewards.  

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How to get a Buy to Let mortgage?

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There are several ways you can obtain a buy to let mortgage but to get the best deal for you, it helps to know a little about how the buy to let mortgage market works.  You may think the easiest way to find a buy to let mortgage deal is by going to your existing bank or building society.  However, remember your bank or building society can only offer you their mortgage products and these may not be the best buy to let mortgage deals for you. You may also find their individual lending criteria around your own personal circumstances or the property you want to buy means they are not able to lend to you at all for this purpose.

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Keys things you need to know about Buy to Let mortgages

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• Lenders require higher deposits, typically 20%-25% of the property value, and come with higher interest rates compared to residential mortgages.

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• The lender's decision whether to approve a buy to let mortgage is based on the rent you will earn and for a few lenders, the income you receive can be considered. However in many cases the income you receive is not important.

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• With the rental income of much importance when attaining a buy to let mortgage, this should be a key factor in your decision-making process when securing property as your investment. I would advise to talk with local lettings agents to discover what properties are in demand and the market rental income expected.

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• Consider the additional costs involved on top of the mortgage costs. To name a few: letting agent fees, property upkeep, ground rent and service charges if leasehold, legal insurance, furnishings, gas/electric appliances and decorating costs.

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Your property may be repossessed if you do not keep up with repayments on your mortgage. Not all Buy to Let mortgages are regulated by The Financial Conduct Authority.