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Buy-to-let mortgages

Posted 13 September 2015 by Keith Osborne

An introduction to the basics of the mortgage you'll need on a buy-to-let new home

If you're buying property to let out to tenants, and you're not paying cash, you'll need a buy-to-let (BTL) mortgage. Most lenders will require you to own your own home, either outright or with a mortgage, before giving you a BTL mortgage. They will also require you to have a good credit record.

There are some key differences between ordinary mortgages and BTL mortgages:

  • Interest rates and fees on BTL mortgages tend to be higher
  • The minimum deposit required for a BTL mortgage is usually 25% of the property’s value
  • Most BTL mortgages are interest-only – now extremely rare on mortgages for owner-occupiers

BTL lending is not regulated by the Financial Conduct Authority (FCA) except for when you wish to let the property to a close family member

The maximum you can borrow on a BTL mortgage is linked to the amount of rental income you expect to receive and lenders typically need your rental income to be 25%-30% higher than the mortgage payment.

It is recommended that you speak with a mortgage broker before taking out a BTL mortgage in order to get the best deal for your circumstances.

It's important to take into account that you may have 'void' periods, where you don't have a tenant, and you'll need to budget for enough funds to cover those times. Of course, this savings fund can be topped up in times when you do have a tenant.


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Individual savings and affordability may vary.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP PAYMENTS ON YOUR MORTGAGE.

If you choose to use Tembo for mortgage advice, we may earn a commission from them for the introduction. This does not negatively impact the amount you'll pay for their service.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652.

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