Buy To Let

What is a Buy-to-Let Mortgage?

A Buy-to-Let mortgage (BTL) allows someone to purchase a property with the intention of renting it out. If the owner wishes to let a property, either for short term lets (such as holiday letting or student accommodation) or for long term lets (e.g. letting out the property for a year or more), then the owner must legally obtain a Buy-to-Let mortgage rather than a conventional one.

Often Buy-to-Let mortgages cost a little more than a conventional mortgage (usually around 1% more) and this reflects the additional risks involved to the lender. Buy-to-Let mortgages typically require the owner to put down a deposit of 25% or more, whereas conventional mortgages require a much smaller deposit.

Traditionally buy-to-let lenders want rent to cover 125% of the mortgage repayments, although many have relaxed this in recent years, despite this they will still be looking for suitable assurance that the payments will be met.

The insurance required on BTL properties is also specialised and has requirements. It can often cost a little more than conventional home insurance as well.

The popularity of Buy-to-Let mortgages has grown in recent years as many people use it as an investment tool using the balance above the repayment amount as a means of generating income. Often people will have portfolios consisting of numerous properties. Obviously this is not without risk as the same potential problems with normal mortgages still apply.

As they are often more expensive mortgagees are more susceptible to fluctuations in the market such as BOE Base Rate rises and house price changes. For example in an economic downturn there can be less demand for rental property or a drop on rent prices which will squeeze profits. Also they are responsible for the maintenance of the property and the costs that this incurs which can reduce income.


Q: Are Buy to Let mortgages regulated?

A:In most instances, Buy-to-Let mortgages are not regulated by the Financial Conduct Authority. Exceptions to this are for “accidental landlords” with Consumer Buy to Let mortgages, which are used by people who are not landlords by trade, but circumstances lead to them having one more property than they need, and it makes more sense for them to rent the property than sell it.

Q: Are Buy to Let mortgages interest only?

A: In most cases, yes. The most common form of BTL mortgage is interest only, and the remainder of the property value is only to be paid upon sale.

Q: What is the buy to let loan to value (LTV)?

A: For most BTL mortgages the maximum LTV is usually set at 60%-70%. This can depend on the mortgage provider chosen and the amount of deposit put forward by the mortgager.

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