What you need to know about buy-to-let mortgages

If buying a house is supposedly one of the most stressful and confusing things you can do, acquiring one for the sole reason of renting it out is even tougher.

And if you do, you won’t simply be able to move a tenant in and have them pay your normal residential mortgage.

A specific buy-to-let agreement is required for any prospective landlord before they put a property up to rent.

Here is everything you need to know about a buy-to-let mortgage.

Who can get a Buy-to-Let Mortgage?

There are no specific restrictions on who is eligible for a buy-to-let mortgage but typically, a lender will consider numerous factors, such as:

  • Deposit size
  • Personal income
  • Credit history
  • Age and health of the borrower

Not owning a property already can also make it more difficult to obtain a mortgage – but not impossible.

Different lenders will have varying criteria for eligibility, so be sure to shop around and seek sound professional mortgage advice.

Advantages of a Buy-to-Let Mortgage

It’s generally accepted that as a long-term investment, property should increase in value.

Which means that when you come to sell the property, with tenants having covered your mortgage payments, you should make a worthwhile profit.

And even better, your rental yield may also provide an amount of further income on top of your payments.

You’ll need to pay tax on rental income above certain thresholds but some of your expenses can be offset against this amount.

For a residential property, these could include Council tax, repairs and maintenance and any fees paid to letting agents.

Before you apply for a buy-to-let mortgage – remember

Typically, you’ll be subject to higher interest rates with a buy-to-let than with a normal residential mortgage.

The minimum deposit required will likely be somewhere between 20 and 25 percent of the property’s value.

And if you already own another property, there’ll be an additional three percent stamp duty surcharge payable on your buy-to-let.

If there’s a potential perceived gap between the rent and mortgage payments, some lenders may also take your personal income into account.

Set for buy-to-let?

If you’re keen to get started as a buy-to-let landlord, the first thing you’ll need to calculate is how much you can afford. Visit our mortgage advice page for more information.

Alternatively you can book a free appointment with one of our in house mortgage advisors, who can visit you in our Chorley office or at your own home.

To arrange your consultation or to ask any questions of our helpful team, please get in touch today.


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