Buy To Let

A buy-to-let mortgage is required if you plan on getting a mortgage on your house that you plan to rent out. Buy to let mortgages typically require a greater deposit and come with higher interest rates than regular mortgages.

You always need a buy to let mortgage if you’re going to rent out your house. Renting your house on a residential mortgage often runs the risk of breaking the mortgage contract. This often comes with steep charges, or even demands to repay the capital in full.

Buy To Let Deposits

Deposits for buy-to-let mortgages are typically larger than those of residential mortgages. Where you would need to find at least a 10% deposit for a residential mortgage, buy to let properties need at least 25%, in some cases, as high as 40%.

The average deposit for a buy-to-let mortgage in the 2016/17 financial year was £62,309, which is over 50% more than a first-time buyer deposit of £39,708, according to MoneySuperMarket data (correct as of December 2017).

Buy-To-Let Rates

Buy to let mortgage rates are dependent on a number of factors, but similarly to residential mortgages, are largely determined by the Loan-to-value (LTV) percentage. The LTV percentage determines how much of the property purchase price is covered by a mortgage.

Assuming you buy a house for £200,000 and have a deposit of £50,000, thats a 25% deposit and a 75% LTV. The lower the LTV, the more likely you are to be offered a lower rate.

Who Can Get A Buy-To-Let Mortgage?

Many people can get a buy to let mortgage, although some lenders require you to own your own property and have a good record of making repayments. Similarly, a good credit rating will help you get better rates. As will having fewer financial commitments, like other loans.

Buy to let mortgages can be considered higher risk, thus the greater deposit required and higher interest rates. As the borrower, you also need to be aware of the risks of not making repayments on time. Failure to do so can result in your property being repossessed.

In some instances, there is a limit on the number of buy to let mortgages one person can have, which is often 3. There can also be a maximum lend amount over all mortgages, but this is often in excess of £2 million.