What's a buy to let mortgage?
A buy-to-let mortgage is a loan specifically designed for people who own or looking to purchase properties with the intention of renting them out to tenants. Without a BTL mortgage, you won’t usually be permitted to let out a property for profit unless you own it outright.
Depending on your preferences, BTL mortgages can be used to buy residential rental property, student accommodation, holiday homes etc.
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Why choose a buy to let property
Buy to let mortgages have become affordable and more easily obtainable, people are now considering owning a second property to try to safeguard their future, following years of uncertainty with pensions and other investments.
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Criteria & risks to consider
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Lenders do not have to consider your job income; the mortgage affordability can be based on the rental income for the property you are looking to buy.
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Buy to let mortgage criteria rarely allow you to go above an 85% loan-to-value or "LTV" so you will need to have secured a 15% deposit available for the purchase of the property.
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You will need to ensure that you can afford to pay the mortgage, in the event of your property being unoccupied.
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Lenders sometimes apply extra conditions on a BTL regarding the age and maximum portfolio size of mortgaged properties.
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You must have landlords' insurance in place on the BTL, standard Buildings and contents policy is not enough since the property won't be occupied by the owner and there is an associated risk with that.
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Most BTL mortgages are interest-only (meaning you will still have the original purchase cost to pay at the end), whereas residential mortgages are normally repayment (you pay part of the loan and interest every month until you own it)
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You must have a plan in place to repay the purchase amount, known as a "repayment strategy"
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING, YOU SHOULD BE AWARE THAT IF YOU ARE EXTENDING THE TERM OF THE DEBT, YOU MAY BE INCREASING THE TOTAL AMOUNT YOU NEED TO REPAY.