Buy-to-Let Mortgage

Buy-to-let mortgage is a loan arrangement in which an investor borrows money to purchase property in the private rented sector in order to let it out to tenants.

As for all property rental, the benefits for a buy-to-let landlord can include a stable income from rental receipts, as well as an accumulation of wealth if house prices go up over time. Rising house prices in the UK have made buy-to-let a popular way to invest.

The main risk involves leveraged speculation where the landlord takes a loan to buy the property, with the expectation that the house can be sold later for a higher price, or that rental income will meet or exceed the cost of the loan. In the best outcome for the landlord, she or he will have benefited from the use of the lending banks money indicating that she or he has allocated the capital more efficiently than professional investors could have done. If the landlord cannot meet the conditions of their mortgage repayments then the bank will seek to take possession of the property and sell it to gain the loaned money. If prices have fallen, leveraging could leave the landlord in negative equity. A further risk is a substantial change in Government policy. Therefore, Buy-to-let mortgages are usually more expensive than normal mortgages, but they could help you become a property investor.

How do buy-to-let mortgages work?

Whether you're buying your first Buy-to-Let property or are an experienced property investor, we will offer you a step-by-step guide to buying an investment property and help you get the best mortgage deal available on the market.

Buy-to-let mortgages are in many ways just like ordinary mortgages, but with some key differences:

Interest rates on buy-to-let mortgages tend to be higher

The minimum deposit for a buy-to-let mortgage is usually a quarter (25%) of the property’s value (some lenders offer deals with a 20% deposit, others want a 40% deposit)

The fees tend to be much higher