A buy-to-let mortgage is a type of mortgage specifically designed for people who want to purchase a property to rent it out rather than live in it themselves. Here’s what you need to know about buy-to-let mortgages:

What should you consider?

  1. Larger Deposit Requirements: Buy-to-let mortgages typically require a larger deposit compared to residential mortgages, often around 20-25% of the property’s value.
  2. Affordability Criteria: Lenders usually assess affordability based on the expected rental income from the property. They often require the rental income to be 125-145% of the mortgage payment.
  3. Interest-Only Options: Many buy-to-let mortgages are offered on an interest-only basis. This means that you pay only the interest each month, with the capital (the amount you originally borrowed) being repaid at the end of the mortgage term.
  4. Tax Implications: Buy-to-let properties come with specific tax considerations. Rental income is subject to income tax, and there may be capital gains tax when selling the property. The ability to deduct mortgage interest from rental income for tax purposes has been reduced in recent years, however this is still currently possible with a Limited Company Buy to Let mortgage. Your tax adviser will be able to help you further.
  5. Portfolio Landlord.” This is a person or entity that owns four or more Buy to Let properties. This can affect the availability and terms of buy-to-let mortgages.

Unlike standard residential mortgages, most Buy to Let mortgages impose no age limit, making them accessible to older applicants. Some lenders even offer Buy to Let mortgages without income proof, basing their lending entirely on potential rental revenue. Keep the long-term plan in mind as tenants pay down your mortgage. If property prices increase over the long term a sound profit can still be made when selling it.

Get in touch to find out more.