Landlord Buy-to-let Mortgage Guide

Looking for quick and easy Buy-to-let Mortgage advice/quotes for your Buy-to-let property? Then you’ve come to the right place.

What is a Buy-to-let mortgage?

A Buy-to-let mortgage is a loan for the sole purpose of purchasing a property to let.

They essentially work like regular residential mortgages. The principle is the same in the sense that you will be required to repay the loan with interest over an agreed period of time (the mortgage term).

Buy-to-let mortgages are extremely competitive

Regardless of what type of mortgage you’re after, the market as a whole is extremely competitive. Rates change every day and new products are released onto the market regularly, so it’s important to shop around and talk to a UK buy-to-let mortgage specialist that can offer free advice and quotes.

It’s important to remember, that even a tiny 0.1% difference in rate can save/cost you thousands over the mortgage period.

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

There are actually several differences, but I’ll cover the basics.

Firstly (and most obviously), the policies are different. Buy-to-let mortgages have specific terms and conditions for properties that are being let.

Secondly, when applying for a buy-to-let mortgage the lender will take into account the rent you will earn from the property as the primary source of income. However, lenders aren’t solely relying on the rental source as much as they used to. Since the recession, lenders are now also heavily taking into account the landlord’s personal income. Lenders still take into account the rental income, but it’s not so much a primary concern, like it used to be.

Thirdly, lenders see buy-to-let mortgages as higher risk than residential mortgages, so you should expect buy-to-let mortgages to come with higher interest rates, product fees, not to mention a requirement for a bigger deposit. Before deciding on a loan, make sure that any high product fee being paid is worth it, as many cost so much that a higher interest rate would be a better bet.

Do I need a buy-to-let mortgage to let my property?

Yes, you do. Although, a lot of borrowers do let their properties out while on a residential mortgage. However, it’s not worth the risk as the potential penalties drastically outweigh the pro’s. Specifically, having the incorrect mortgage would most likely invalidate your landlord insurance. In the event of an emergency (e.g. property burns down), you would not be covered with insurance. Most Insurers cover themselves by stating in the terms and conditions of the policy that the policyholder has the lenders permission to let.

What would happen if I get caught letting my property on a residential mortgage?

It depends on the lender, but what you’re doing essentially constitutes as “mortgage fraud” The lender could possibly do the following:

  • Revoke your loan and ask for immediate redemption of the mortgage
  • Automatically change your rates to a higher amount that reflects their current Buy-to-let products
  • Enforce financial penalties

There should be more details on the lenders rights in the event of breaking their terms and conditions.

I want to let my current residential house, do I need to remortgage?

Not necessarily.

It’s common for people to buy a second home, while letting out their first property. In this case, you must inform your lender that you wish to let your property. In a lot of cases, it will just be a straight forward switch over. Most lenders will charge an admin fee to do so, and maybe even put you onto a new rate, but you shouldn’t need to remortgage with a new lender (unless you want to). Either way, it’s imperative to inform your current lender that you will be letting your property.

Some lenders may not allow you to let your property. In this event, you may have to remortgage. But you will also need to check to see if you’re tied into the policy.

It’s also important to remember that if you do switch to a buy-to-let mortgage, you will also need to acquire landlord insurance– standard residential building insurance will not be valid. Again, it’s best to contact your current insurer and discuss it with them first. It may just be a quick process of updating their records.

5 Comments- Join The Conversation...

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Glenda Board 19th January, 2015 @ 21:23

We already own a house we're thinking of letting but can we take out a buy to let mortgage on it ?

1
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Glenda Board 19th January, 2015 @ 21:24

Oh yes there is no mortgage on it at the moment.

2
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David 8th April, 2015 @ 19:43

Yes, but not if it us currently your home, but if it is and you want to to buy another home you can apply for a let-to-buy.

3
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bhavini munro 16th April, 2015 @ 12:24

How easy is it to get a BTL mortgage as a Ltd Company?

4
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Ian springett 16th June, 2015 @ 18:54

Is anyone else having difficulty getting a buy to let to rent to a relative?

5

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