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Buy-to-let mortgages explained

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Buy-to-let mortgages are predominantly sold to people who purchase properties as an investment, whereas on the contrary most people purchase a property as a place to reside in. If you have plans to rent out your newly bought property, most mortgage providers will be inclined for you not to finance the property via a standard residential mortgage.

Who are buy-to-let mortgages for?

A buy-to-let (BTL) mortgage is generally taken out by an experienced investor or a new landlord looking to invest in the rental property market. BTL’s are more expensive than residential mortgages and require deposits between 20% – 25% of the value of the home and in some cases specific lenders may even want 40%. This is due to higher risk being involved.

As with residential mortgages, the higher the deposit – the better rates will be available. Hence, why investors with 40% deposit are able to secure the best rates. Lenders will have to assess your affordability to determine how much you can borrow, this includes taking your existing portfolio into account and reviewing any previous history of obtaining and paying off buy-to-let finance.

Criteria for buy-to-let mortgages:

  • You must be at least 21 years old.
  • You must be a UK resident.
  • Earn £25,000 a year or more.
  • Have a good credit record.

How do buy-to-let mortgages work?

The vast majority of borrowers take out an interest-only mortgage for their property. This means that, every month of the mortgage term, only interest on the loan will be paid and none of the capital repayments. This will help you to minimise your monthly outgoings, however you must note that it is necessary to have a plan in place to pay off the full loan at the end of the mortgage term.

How to compare buy-to-let mortgages?

When reviewing mortgage deals, it is important to assess the total costs of the loan. This is because cheaper rates can be at times outweighed by higher fees. There tends to be higher upfront fees especially on BTL mortgages in comparison to residential mortgages. The most inexpensive deals come with flat fees from £1495 to £1999, or percentage fees of 2%.

Buy-to-let mortgage brokers at Town and Country

Here at Town and Country we have specialist buy-to-let mortgage brokers who can assist you with your BTL mortgage and simplify the process for you. Get in touch with us and we can arrange an appointment!

Tanjima Haque

Tanjima is one of our Graduate Systems Support Coordinators at Town & Country Mortgage Services.

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