Buy-to-let mortgage (BTL)
A buy-to-let mortgage (BTL mortgage) is a type of loan designed specifically for individuals who want to purchase a property to rent out rather than live in it. This mortgage allows the buyer to borrow money to buy a property that will generate rental income, and the loan is typically repaid through the rental income from the property.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE SOME FORMS OF BUY TO LET
Understanding Your Finances
1
Credit Score
Lenders use your credit score to assess your ability to repay a mortgage. A good credit score can help you secure a better interest rate.
If your credit score needs work, take time to improve it before applying for a mortgage.
2
Deposit
Most lenders require a down payment, which is a percentage of the home's purchase price. As a BTL most lender will require a 20-25% deposit.
3
Affordability
Lenders will also assess how much you can afford to borrow based on your rental income, your income and existing financial commitments.
As a general rule, the more you can save for a down payment, the better your mortgage options will be.
Key Features of a Buy-to-Let Mortgage
Types of Buy-to-Let Mortgages
1
Repayment Buy-to-Let Mortgage
With this type, you pay both the interest and the principal. Over time, you build equity in the property, and the mortgage will be paid off at the end of the term.
2
Interest-Only Buy-to-Let Mortgage
Here, you only pay the interest on the loan each month, meaning your monthly payments are lower. However, the original loan amount (the principal) is due at the end of the mortgage term. This type of loan is typically favored by investors who expect to sell the property or refinance before the principal is due.
Other costs
In addition to the deposit, there are other costs to keep in mind when buying a home for the first time
