A simples guide

Best buy to let mortgages

It’s predicted that by 2025, 7.2 million households will rent their homes from private landlords – that’s a lot of tenants and a lot of landlords.

If you fancy being a responsible landlord, then look no further because you can start to build your own property empire right here and compare buy to let mortgages right now.


What is a buy to let mortgage?

A buy to let mortgage is specifically for people who want to invest in property and rent out houses and flats to tenants. It’s not the same as a regular residential mortgage because:

- interest rates are usually higher

- the minimum deposit needed is usually at least 25% of the property’s value

- fees are usually higher

Buy to let mortgages are available as repayment or interest only mortgages, but most landlords often opt for interest only repayments which means that none of the capital is paid off until right at the very end of the mortgage.

To let sign
Mortgage calculator

Why can’t I use a regular residential mortgage for a buy to let property?

In some cases, a residential mortgage will have clauses that stop you from renting out your property to make money (as opposed to letting out a room to family or having a friend to stay). If you do end up renting a room, or your whole house or flat, and your mortgage says you can’t then you’ll be in breach of your mortgage contract. The worst case scenario, should you be found in breach of your mortgage contract, could mean you might lose your property if you can’t afford to repay your lender immediately. If you do decide to become a landlord then honesty is definitely the best policy when choosing a mortgage – so always plump for a buy to let mortgage.

Who can get a buy to let mortgage?

In order to get a buy to let mortgage, you’ll usually need to own your own home (either outright or paying a mortgage). It will also help to have a good credit history as well as not being too much in debt (like on your credit cards).

You might find some lenders also want the added security of knowing you earn more than £25,000 a year. And you will find that lenders will set an upper age limit, meaning that you can’t be older than normally 70 or 75 when the mortgage term comes to an end. So if you’re looking for a 20 year mortgage, you may have to be under 50 for a mortgage provider to agree to a mortgage.

Piggy bank and house

How much could I borrow with a buy to let mortgage?

What you’ll get is directly linked to what rental income you might get. Most mortgage providers would expect your potential rental income to be between 20-30% more than your mortgage payment.

Are there any risks involved with buy to let mortgages or being a landlord?

Well – where do we start? As with any mortgage or business transaction, there will of course be risks. But you can minimise those risks by just making sure you do some sums (and do them correctly). Areas you’ll need to think about include:

Stamp duty – is now an additional 3% for buy to let mortgages

Landlord tax relief is being phased out – from 2017 the amount of money that landlords can claim back in income tax relief will be slowly reduced over the next four years. This means that by 2021 you’ll only be able to claim back tax deductions at the basic rate.

Mortgage costs – your buy to let mortgage rates may vary according to the type of agreement you go for so always make sure you’ve factored in any fluctuations.

Fees and maintenance – you may have to consider any fees you pay, for example if you use a letting agency to manage your property for you. You’ll also need to make sure that you build in maintenance costs. With landlordship comes great responsibility and you’ll be expected to make sure your tenants live in decent conditions so you need to factor this in. You might be happy to live with leaky taps and broken fences but your tenant might not.

Health and safety – landlords are responsible for annual gas safety checks, you’ll also need to make sure you regularly check any other electrical items are safe and in working order amongst other things. It’s always worth checking out what you need to comply with to stay within the law and calculating how much this might set you back.

Unlet periods – there may be times when your property won’t be lived in, even if you’re a brilliant landlord with the best property in the street, it can happen. So make sure you’ve got a bit of cash stashed away to help in times when you are not receiving a rental income.

So if you’re looking to invest in property and are in the market for a buy to let mortgage, it’s important to make sure you’re getting the right level of cover for you. You can compare buy to let mortgages now and make sure you’re getting the best deal for you. 

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