Just Mortgage Brokers: The Basics of Buy to Let Mortgages

A buy to let mortgage is a loan that is specifically designed for people who are looking to purchase a property in order to rent it out. These types of mortgages are usually only available to people who already own their own home, as they are considered to be a higher risk than standard residential mortgages.

If you’re thinking of becoming a buy to let landlord, you’ll need to take out a specialised mortgage. In this guide, we’ll cover the basics of buy to let mortgages, including how they work and what you need to qualify.

What Is a Buy to Let Mortgage?

A buy to let mortgage is a loan taken out specifically for the purchase of a property that will be rented out to tenants.

Unlike a standard mortgage, buy to let mortgages usually have higher interest rates and require a larger deposit.

This is because buy to let properties are considered to be a higher risk by lenders.

How Do Buy to Let Mortgages Work?

Buy to let mortgages work in much the same way as standard mortgages. You’ll need to put down a deposit (usually at least 25% of the property’s value) and then make monthly repayments until the loan is paid off.

The main difference is that with a buy to let mortgage, the property is considered an investment rather than a home. This means that the mortgage lender will take into account the expected rental income when assessing your application.

What Do You Need to Qualify for a Buy to Let Mortgage?

To qualify for a buy to let mortgage, you’ll usually need to have a good credit history and a sizeable deposit. Lenders will also take into account your income and outgoings to make sure you can afford the monthly repayments.

You’ll also need to prove that the property is suitable for rental purposes. This usually means that it must be in good condition and located in an area with high demand for rental properties.

What Are the Risks of Buy to Let?

While buy to let can be a lucrative investment, there are also some risks involved.

The most obvious risk is that your tenants might default on their rent, leaving you out of pocket.

There is also the risk that the value of your property could fall, meaning you might end up owing more to the mortgage lender than the property is worth.

Before taking out a buy to let mortgage, it’s important to understand the risks involved and make sure you’re prepared for them.

How Much Can You Borrow with a Buy to Let Mortgage?

The amount you can borrow with a buy to let mortgage will depend on a number of factors, including the value of the property, your income and your credit score.

Lenders will also take into account the rental income from the property, as this will be used to repay the mortgage.

Generally, you will need to have a deposit of at least 25% of the property value in order to be eligible for a buy to let mortgage.

The Bottom Line

If you’re thinking of becoming a landlord, you’ll need to take out a buy to let mortgage. These mortgages are slightly different from standard mortgages, so it’s important to understand how they work before applying.

With a buy to let mortgage, you’ll need to put down a larger deposit than you would for a standard mortgage. You’ll also need to prove that the property is suitable for rental purposes.

Before taking out buy to let mortgages, make sure you understand the risks involved.

Sponsored