August 15, 2022 1:54 pm

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James Nicholson

Buy to let mortgages explained, where do you even start? Buying your first investment property is daunting. So much jargon, does it impact your tax, what could you earn, etc. In this blog,  I deep dive into the buy to let mortgages explained, everything you need to know to start your property empire.



What is a “Buy-to-let Mortgage”?

Buy-to-let (BTL) mortgages are frequently used by landlords who want to purchase real estate in order to resell it. There are some significant differences between the regulations governing buy-to-let mortgages and those governing regular mortgages.

Who can get a buy-to-let mortgage?

You might get a buy-to-let mortgage under the following circumstances:

  • You desire to invest in homes or apartments.
  • You can afford the risks and are aware of them when investing in real estate.
  • You already own a home, either outright or with a mortgage that is still owed.
  • You have a solid credit history and don’t have too many outstanding loans or credit card balances.
  • You make £25,000 or more per year; if your income is less, it may be difficult to get a lender to approve your buy-to-let mortgage.
  • You are younger than the upper age limit set by lenders, which is typically between 70 and 75. You can only be this old when your mortgage is paid off, not when it first begins. For instance, if you take out a 25-year mortgage at the age of 45, it will expire when you are 70.



How do buy-to-let mortgages work?


Buy-to-let mortgages are very similar to regular mortgages, but there are some significant differences.

  • The costs are typically much higher.
  • Buy-to-let mortgage interest rates are typically higher.
  • Although it can range from 20 to 40%, the minimum deposit for a buy-to-let mortgage is typically 25% of the property’s value.
  • The majority of BTL loans are interest-only. As a result, you only pay the interest each month and not the capital. You pay back the initial loan in full at the conclusion of the mortgage term. BTL loans can also be obtained with a repayment plan.
  • The Financial Conduct Authority does not regulate the majority of BTL mortgage lending (FCA). There are some exceptions, like if you want to rent out the property to a close relative (e.g. spouse, civil partner, child, grandparent, parent or sibling). These loans, also known as consumer buy-to-let mortgages, are evaluated in accordance with the same stringent affordability guidelines as a home loan.

The Financial Conduct Authority regulates the advice, arrangement, lending, and administration of BTL mortgages for consumers under the same laws that apply to residential mortgages (FCA)



Is it a good idea to invest in buy-to-let mortgage right now?

New buy-to-let mortgages have doubled since September 2020, according to UK Finance, as both new and experienced landlords profit from the rising rental demand. Even though they anticipate a leveling off in 2022, lending volumes seem destined to stay higher than in 2019 and 2020.


Although specific factors will influence your eligibility for a mortgage, the current rental market is strong and less risky, suggesting that now is a good time for investors to apply for a buy-to-let mortgage.


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