BUY TO LET
Buy To Let Mortgages
Becoming a landlord isn’t an easy way to make money, and it’s worth going in with your eyes open. It can be riskier and more time consuming than other forms of investment, and there’s no guarantee property prices will keep rising. That said, letting out a second property can bring in solid returns over time, and we’re here to help you work out whether it’s the right move for you.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.
What makes a buy to let mortgage different?
There are three main ways a buy to let mortgage differs from a residential one:
- Rent potential. Whether you’re offered a mortgage usually comes down to the rent the property could achieve, as well as your income. In some cases, your income isn’t considered at all.
- Interest rate. Buy to let mortgages typically come with slightly higher interest rates than residential ones.
- Deposit size. You’ll usually need a bigger deposit, typically 20 to 25% of the property’s value.
Before you buy, it’s worth deciding what you’re actually looking for, monthly income from rent, or long term growth in the property’s value. That decision affects the kind of property you should buy and where. As a rough guide, aim for a gross rent of around 135% of your interest-only mortgage payments, so you’ve got a buffer if costs come up unexpectedly.
Buying through a limited company
Some landlords choose to buy through a limited company rather than in their own name, usually for tax reasons. It isn’t the right choice for everyone, and the mortgage options work a little differently, often with a smaller pool of lenders and sometimes higher rates. We’ll talk through whether it makes sense for your circumstances before recommending either route
Costs to budget for beyond the mortgage
- Property upkeep. Ongoing maintenance costs for the property.
- Letting agent fees. Typically around 10% of monthly rent for finding and vetting tenants, with an additional 5% or so if you want full management.
- Ground rent and service charges. These apply to leasehold properties.
- Legal insurance. Covers the cost of evicting tenants if they stop paying, which can get expensive.
- Buildings and contents insurance. For the property itself and any furnishings you provide.
- If you’re letting the property furnished, check your home insurance actually covers this.
- Gas and electrical safety. Ongoing costs to maintain appliances and meet safety regulations.
- Decorating and refurbishment. Work like painting or a new bathroom suite before the property’s ready to let.
A local letting agent can be a good source of advice here too. They’ll know which types of properties are in demand, which parts of town work best, and whether there’s a university nearby driving demand from students.
Buy to let questions we get asked a lot
How do I get a buy to let mortgage?
You’ll usually need a deposit of at least 20 to 25%, and lenders will look at the rent the property could achieve alongside your own income. We’ll help you work out what you’re likely to be offered and find lenders that suit your situation.
How much deposit do I need for a buy to let mortgage?
Most lenders ask for a minimum of 20 to 25% of the property’s value, higher than a typical residential deposit. The exact amount can depend on the lender and the property itself.
How much can I borrow for a buy to let mortgage?
This is usually based on the rental income the property could achieve rather than just your salary. Lenders typically want the rent to cover a set percentage above the mortgage payment, so we’ll help you work out realistic borrowing based on the numbers for your specific property.
Can I get a buy to let mortgage through a limited company?
Yes. It suits some landlords more than others, usually for tax reasons, though the lender pool is smaller and rates can be a little higher. We’ll help you weigh this up against buying in your own name.
Do I need a mortgage broker for buy to let?
You don’t have to use one, but going whole-of-market means we can compare deals across lenders rather than just what’s available directly. For buy to let especially, where lending criteria varies more between lenders, that comparison can make a real difference to what you’re offered.
Thinking about becoming a landlord?