A buy-to-let (BTL) mortgage is one that's specifically for a property you plan on renting out as opposed to living in yourself.
It can be more difficult to obtain a BTL mortgage though you don't have to go to a specialist lender. Before agreeing to a BTL mortgage, lenders take into account different factors than they would consider for an owner-occupier property. For instance, the anticipated rental income generated from a property would be a factor in working out what size of loan a lender would give. Rental income would usually have to be around 25% to 30% higher than the mortgage repayments. It would also, normally, be required for the homebuyer to already own their own home outright or through a mortgage. In addition, they would need a good credit record.
Some of the differences between BTL mortgages and ordinary mortgages:
- Fees and interest rates would generally be higher with a BTL mortgage than an ordinary mortgage.
- The minimum deposit needed for BTL mortgage is generally 25% of the property's value
- Most BTL mortgages are interest-only which is hard to find with owner-occupied mortgages.
With buy-to-let, it's essential to research the market thoroughly including what type of property and which area would be best for you. Also, when it comes to investing in the BTL property market, it can be especially advisable to hire the services of a mortgage broker or independent financial services advisor. They will be able to show how best you can maximise investment.