When you buy a property with the intention of renting it out rather than living in it yourself, you can get a specific Buy-to-let (BTL) mortgage.
Although it can be harder getting a BTL mortgage, it’s not necessary to go to a specific BTL lender. Most lenders handle BTL mortgages, they just take into account additional factors than with an owner-occupier mortgage. An example of this would be the lender asking what the anticipated rental income would be of the new house. This would help decide the loan amount they would give. On average, this anticipated rental income is around 25% to 30% above the mortgage repayments. Usually, it would also be necessary for you to already own your own property, either through a mortgage or outright. A good credit record is also a requirement.
How owner-occupier mortgages and BTL mortgages differ
Interest rates and fees – These would usually be higher with a BTL mortgage
Interest-only mortgage – The majority of BTL mortgages are interest-only whereas it’s rare for an owner-occupier mortgage to be interest-only
The deposit – For a BTL mortgage, the deposit would normally be around 25% of the new house purchase price. If you’re considering buy-to-let, it pays to do your research beforehand such as finding out which area would be the most suitable for your plans as well as knowing what type of property would be best for you. As always, with any type of investment, it can be helpful to seek the services of an independent financial advisor or mortgage broker.
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