What is a buy-to-let mortgage?

Speaking about a Buy-to-Let or BTL mortgage is one type of mortgage that you can apply for if you are planning to rent the property that you want to buy. You can also opt for this if you already have a house and you want to rent it whilst you are leaving somewhere else. Buy-to-let properties can come in different sizes and shapes, from apartments to houses and more. Unless you have a property outright, it is generally against the rule of your mortgage lender to rent the house without a proper BTL mortgage. BTL can be discounted rate, tracker, fixed rate, etc.

There is a lot of information that you will have to explore, as BTL mortgages are a little different from standard residential Quick business loan uk mortgages. So, to help you out with this, we have mentioned some important information related to BTL mortgage.

How do buy-to-let mortgages work?

If you compare, you will find that, in some ways, a BTL mortgage is a little similar to the mortgage they can obtain to buy a residential property. That means with a larger deposit; you can increase your chances of availing of the best deals. Besides, you will have to pay the monthly repayments.

To generate profit from the rental payments, the payments should be more than the cost of property maintenance and the monthly mortgage repayments.

A major difference is that BTL mortgages are generally interest-only instead of repayment mortgages. You might be wondering what that means. Well, your monthly repayment will contribute to covering the mortgage interest and not the actual loan. You may need to pay back the amount when the terms of the mortgage end. If you want, you can buy the property and make money, or you can sell the house at the end of the term to clear your BTL mortgage.

When you have a BTL property, you will have to pay for the property’s renovation as well as improvements before you can rent out the property. Besides, you will also have to pay income tax.

The amount that you can apply for a BTL mortgage will depend on the monthly rent that you want to fix, not based on your salary. That means if the house is located in a central location and large, then the rent can be high, and you can apply for a large mortgage or take the 90% BTL rates mortgage.

Another major difference that you should keep in mind is BTL mortgage is riskier compared to a residential mortgage. So, the lender may ask for a large deposit, around 24 to 30 percent. With a bigger deposit, you can get a better deal.

How much can I borrow for a buy-to-let mortgage?

In general, most lenders will pay based on how much you can lend on the property’s rental income level. As per the experts, for a profit, the projected rental income should be able to cover the monthly mortgage repayment and make sure the rent is around 25 percent more than the rent. Considering all these factors, your lender will decide how much you can get. In some cases, some lenders may require the additional coverage to be around 45 percent to ensure you will be able to afford the BTL property.

While applying for a BTL mortgage, conduct extensive research and do BTL best rate comparison to choose the best one for you. You can also take expert help here. Some lenders offer a BTL mortgage calculator to evaluate how much you can borrow.

What are the interest rates for a buy-to-let mortgage?

As per a buy-to-let mortgage rates comparison, the interest rates on BTL mortgages are a little higher than the residential mortgages as BTL mortgages depend on tenancies and rental income. It doesn’t consider your personal income. The rate of interest will vary based on the lenders you choose. You can get a 90% BTL rates with an introductory rate of around 3 percent, but for a high-risk agreement, it can go up to 9 percent.

However, to enjoy the best interest rates, you can make a large deposit. Besides, take the help of a professional mortgage advisor who specializes in BTL mortgages, for example, Funding Hut. Their lender contacts, experience as well as knowledge will increase your chances of landing the best Buy-to-let mortgage deal. Get in touch with them now for more information.