Buy-to-Let Mortgages Explained

Sarp at Planet Mortgages

24 January 2022
By Sarp

Interested in investing in property? A buy-to-let (BTL) mortgage could be the solution that you have been looking for.

A buy-to-let mortgage is a product that is sold specifically for those who buy property as an investment, rather than getting a mortgage for a home that you’d like to live in yourself. If you’re planning on renting out your property that currently has a standard residential mortgage, it’s important to speak with your lender and obtain their permission first. Most mortgage providers will prefer you to switch to or take out a buy-to-let mortgage. We understand that the different types of mortgages may seem a little confusing but we’re here to help. Below, our team has compiled some useful information on buy-to-let mortgages…

How Does a Buy-to-Let Mortgage Work?

As we mentioned above, a buy-to-let mortgage is a product that is sold to those who are interested in investing in property. You can get a buy-to-let mortgage on a range of properties including both houses and flats. BTL mortgages are offered on an interest only or repayment basis. It’s important to figure out the best option for you and ensure that you understand the pros and cons of each option. 

What are the Differences Between a Buy-to-Let Mortgage and a Standard Residential Mortgage?

There are several key differences between a standard residential mortgage and a buy-to-let mortgage, for example, you might find that the fees and interest rates on the BTL mortgage product tend to be higher than standard mortgages. You might also need to put down a larger sum of cash as the deposit required on this type of mortgage typically ranges between 20 - 40%. These are just a few of the differences between these types of mortgages. To ensure that you’re as clued up as possible, it’s a good idea to talk to a trusted mortgage broker. Your mortgage broker will be able to talk you through the options and help you choose the right option for you. 

How to Choose Between an Interest-only or Repayment Mortgage for a Buy-to-Let Property?

This will largely depend on your individual circumstances and your goals. In order to choose which option is right for you, it’s important that you have a clear understanding of each. An interest-only BTL mortgage means that you’ll only pay the interest each month and not the capital amount. At the end of your mortgage term, you’ll be required to repay the original loan amount in full. Whereas with a repayment mortgage, you’ll own the property outright once the mortgage has been fully paid. Landlords with an extensive property portfolio may find that interest-only mortgages help to finance their investments. Whereas repayment mortgages might work better for those just starting out as a landlord. However, this does depend on your financial circumstances and it’s always a good idea to discuss it with an experienced mortgage professional. 

Landlord Commitments

Whilst renting out a property can be a great way to boost your income, it’s important to make yourself aware of the expectations of a landlord. There are several rules, regulations and guidelines that you might want to familiarise yourself with before making the decision. 

Think that a buy-to-let mortgage could be perfect for you? Here at Planet Mortgages, we have a team of experienced mortgage brokers and advisers based in Colchester, Clacton and the surrounding villages who can help guide you through the entire process. We’re passionate about finding out of this world mortgage deals and helping people achieve their property goals.  

Looking for a mortgage broker in Essex to help with your buy-to-let mortgage application? Get in touch with a member of the Planet Mortgages team.