Buy to Let

Frequently Asked Questions

What is a Buy to Let mortgage?

A Buy to Let mortgage is a way to borrow money when you are buying property as an investment to rent out. You are not able to live in the property yourself.

What is a Buy to Let mortgage used for?

A Buy to Let mortgage can be used to buy any type of property, that will be let out. You will become the landlord. You will have certain responsibilities for maintaining the property and making sure all safety regulations are followed. You will find tenants and charge them rent. You could get someone else to do this for you, such as a letting agent, but this would be at an extra cost.

How do Buy to Let mortgages work?

The vast majority of Buy to Let mortgages are interest only – so your monthly payments will only pay off the interest on the loan.  This means that the monthly payments will be less, but you must either pay off the loan in full, sell the house or remortgage it at the end of the mortgage term. Repayment mortgages are uncommon. Generally, with Buy to Let mortgages the amount you can apply for depends on the rent you are likely to get, not your income. The predicted rental income needs to be 125% of the mortgage payments. The deposit amount will often be higher, than a residential mortgage, at 25%, possibly more. You will have to meet certain landlord criteria, for example tenancy law including complying to all safety regulations.

Can I get a Buy to Let mortgage with another person?

Yes, this is called a joint Buy to Let mortgage.

Do I need experience?

No, Lenders will look at a number of factors.

Can I get a Buy to Let mortgage as a first time buyer?

Yes, depending on your circumstances.

Are there different types of Buy to Let mortgage?

Yes, the most common types are:

Interest only: where the interest is the only part of the loan being repaid, you would have to make provision to pay off the capital by the end of the mortgage.

Fixed rate: where the sum repaid is at a fixed interest rate for a period of time, usually between 2 and 5 years. This can be useful to manage your money. After that the interest reverts to the lenders standard variable rate for the rest of the mortgage unless you complete a new mortgage deal.

Variable rate: where the monthly interest base rate is set by the lender and adjusted monthly or annually meaning it could go up or down.

Tracker rate: where the interest rate tracks the Bank of England`s base rate meaning it could go up or down.

Discounted rate: this is a form of variable mortgage, where the interest rate is set just below the lenders standard variable rate, for a set period of time.

How much does a Buy to Let mortgage Cost?

Typically, the costs include:

Broker Fee

Product fee, charged by the lender (some do not charge)

Deposit

Valuation Fee, these can vary

Solicitors/Conveyancers Fees, these can vary

Insurance, you must insure a mortgaged property, these can vary

Monthly payments, ongoing. (See ‘Do you pay monthly?’ below)

Letting Agency fees (if applicable)

Do I Need a deposit?

Yes, a deposit is required. It is usually a minimum of 25%.

Do I pay monthly?

Yes, the amount you pay is based on the amount borrowed, interest rate, and term.

What is a Buy to Let remortgage?

A remortgage is when you move your Buy to Let mortgage on your Buy to Let property, from one lender to another. Your new mortgage replaces your old one.

You may want to remortgage if you are: coming to the end of your existing mortgage rate, looking for a better deal or are wanting to borrow more money against your property (Capital Raising).

You need to be aware you may be charged an early redemption charge and fees such as a new valuation, as well as solicitors fees.

Can I get extra funds when I remortgage?

Yes, you can. This is called Capital Raising. Providing you have enough equity in your property and you meet the lenders criteria, you can remortgage your property to release funds for other purposes. For example improvements, or to fund another Buy to Let property.

Is it helpful to know the EPC (Energy Performance Certificate) rating for the property?

Yes. Some lenders offer better rates for properties rated A-C. Also, all rental properties must be rated E or higher prior to being let.

How can I find the EPC (Energy Performance Certificate) rating for my property?

Use this link to the government website to check if you have one, or to get one, costs apply.

https://www.gov.uk/get-new-energy-certificate

Can I get a mortgage if I have adverse credit?

Adverse credit, also known as bad credit, does not necessarily mean you are unable to get a mortgage. Every situation is unique and we can advise accordingly.

How can I check my credit report?

Use this link for Check My File Credit Report

https://www.checkmyfile.partners/694W2WN/2CTPL/

Check my file offers a 30-day free trial which is £14.99 per month, thereafter, and can be cancelled at any time.

What should I do next?

When you are ready, please give us a call. One of our friendly advisers will gather information about your enquiry and offer advice accordingly. We offer FREE initial consultations.

Case Study Example

Mr and Mrs X have a combined annual income of £9,000.

The house they wish to buy as a Buy to Let is priced at £120,000 with an expected rent of £650 per month. They have a deposit of £30,000 (25%).

After advice, they chose an interest only mortgage over 25 years, and a 5-year fixed deal at 4.74%. This deal had no arrangement fee and a free valuation.

Their monthly payments are £355.50.

Once the fixed rate ends the mortgage will revert to the Lenders Standard Variable rate, currently 8.24% which would mean the payment would then be £618. They could, however, remortgage to a new deal.

This example is based on figures from a high street lender on 01/04/2024 and is for illustrative purposes only.

Your property may be repossessed if you do not keep up repayments in line with the lenders schedule. Think carefully before securing debt against any property.