What Is a Buy-to-Let Mortgage? A Simple Guide for Beginners

A buy-to-let (BTL) mortgage is a type of mortgage used when you’re buying a property to rent out. ‘Let out’ is another way of saying ‘rented’

A tenant is someone who rents a property, and a landlord is someone who rents (lets) a property out.

What’s the difference between a buy-to-let mortgage and a standard mortgage?

With a standard mortgage, you’re buying a home to live in yourself, with no intention of renting it out. With a buy-to-let mortgage, you’re buying the property to rent it out and make a profit.

A standard mortgage has interest rates that are usually lower because there’s less risk. The bank has assessed the applicant’s affordability and creditworthiness.

With a buy-to-let mortgage, because the lender won’t know who is renting the property, whether the tenant will maintain it, or if they’ll keep up with rental payments (which could affect the mortgage owner’s ability to pay), the interest rates are higher.

Who offers buy-to-let mortgages?

The majority of high street lenders and building societieis offer buy-to-let mortgages, including NatWest, Halifax, and Barclays. There are certain lenders that specialisze solely in BTL’s such as BM Solutions.

What size deposit do you need?

For a buy-to-let, most mortgage lenders will want a 25% deposit, meaning a £100,000 property will required a £25,000 deposit, some lenders may consider a 15% deposit.

How do you find tenants?

There are multiple ways to find a tenant for your rental property, you can do it yourself by advertising on a website such as opentorent or Zoopla, or you can hire an estate agent to manage your property and tenants for you. Estate agents may take a fee between 5-15% of your monthly rental income.

How do I get a buy-to-let mortgage?

When it comes to picking a mortgage lender for a buy-to-let mortgage, you will be able to find the best mortgage product by talking to a mortgage adviser, as they have access to the whole of the mortgage market and can compare the rates.