A Guide to Buy-to-Let Mortgages

If you want to buy a property to let, there's a good chance you're going to need a buy-to-let mortgage.

But how do these work and what do you need to know about them? Here's a guide to explain the details.

How Buy-to-Let Mortgages Work

Buy-to-let mortgages are very similar to standard mortgages in that you borrow money from a lender that you use to purchase a property.

However, the fact that you are buying a property to let means that the mortgages come with a few key differences to be aware of.

Firstly, the minimum deposit required for this type of mortgage is often higher. It can start at about 25%, but it is often up to as much as 40%.

In addition, you can expect to pay higher fees and higher interest rates compared to standard mortgages. You will also find that most of them are interest only.

Restrictions on Buy-to-Let Mortgages

Not everyone can take out a buy-to-let mortgage, and there are often more restrictions compared to standard mortgages.

The main requirement is that you usually have to be a homeowner already. This could mean that you own your property outright, or you might have a mortgage on a property. Without this, you will find it quite hard to get a buy-to-let mortgage.

There are usually minimum limits on the amount of money you earn each year. The average amount that you will need to earn over is about £25,000 a year.

Age also plays a role in whether you will be able to take out a buy-to-let mortgage. Some lenders will have upper age limits of about 70, and this is the age at which the mortgage comes to an end rather than starts. So for a 30-year mortgage, you would have to be aged 40 or under.

Amount You Can Borrow

The maximum amount you can borrow varies, but it usually relates to the rental income you expect to earn from your investment. As a standard rule, most lenders will want your rental income to be about 25% higher than the mortgage payment.

Where to Get a Mortgage

Your best bet for getting a buy-to-let mortgage is usually to go to one of the large banks, most of which will provide them. However, you could also approach specialist lenders.

One idea is to speak to a mortgage broker, who can help you to make sense of the options available so you can make a better decision on where to take out your mortgages.

You might want to speak to the Mortgage Advice Bureau, for example, to get access to expert mortgage advice. Its advisers are based all over the country, and they can help you to search over 80 lenders so you can compare your options and choose the mortgage that is most suitable for your situation.

Don’t Rush Into Getting Your Mortgage

These are the main issues to be aware of if you want to take out a buy-to-let mortgage. Taking out a mortgage is not a decision to be taken lightly, so don't rush into anything.

Instead, look at all your options, consider speaking to a mortgage broker to get their advice, and then choose the best mortgage for your situation.

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