Aspiring landlords will not be allowed to use a standard mortgage to buy their investment property. They are required to use a buy-to-let mortgage. Uncover the details of a BTL mortgage here and speak with a Moneysprite buy-to-let mortgage broker for tailored support.
What is a buy-to-let mortgage?
A buy-to-let mortgage, also known as a BTL mortgage, is a mortgage for those wanting to buy property to rent out as an investment. If you plan on becoming a landlord and renting the property out, you must have a buy-to-let mortgage instead of a residential mortgage.
Many buy-to-let mortgages are interest-only mortgages where only the interest is paid, and the principal amount is repaid at the end of the mortgage (usually saved up through rent payments). However, there are other types of BTL mortgages available.
Who can get a buy-to-let mortgage?
Anyone can get a buy-to-let mortgage – subject to lender approval - if they are going to rent out the property they are purchasing. Lending to someone who plans to rent out the property is considered riskier by lenders. This is because they have no control over the tenants and their ability to keep up with their rent. As a result, you usually need a larger deposit to access a BTL mortgage.
How much can you borrow?
As there is increased risk with a BTL property, lenders typically require a bigger deposit than if you were taking out a residential mortgage. Whereas you can get mortgages with as little as a 15% deposit for residential mortgages, you may need between 25-40% deposit for a rental investment property.
Therefore, you will not usually be able to borrow around 75% of the property value or less. How much you can actually borrow will be determined by individual circumstances, such as your income and existing debts.