Considering purchasing a property for rental purposes? Buy-to-let mortgages offer a viable option. Understand deposit requirements, lender assessments, and their impact on mortgage rates through this detailed guide.
What is a buy-to-let mortgage?
A buy-to-let mortgage (BTL) is designed for individuals interested in purchasing a property for rental purposes rather than personal residence. Typically sought after by investors or landlords seeking to expand their property portfolio, these mortgages are structured as interest-only, requiring borrowers to pay only the interest on the loan amount, rather than the principal.
What is the minimum deposit for a buy-to-let mortgage?
Buy-to-let mortgages usually demand a larger deposit compared to residential mortgages, ranging from 20% to 25%. Lenders perceive them as riskier due to reliance on rental income for repayment.
Can I get a buy-to-let mortgage with a low deposit?
Securing a buy-to-let mortgage with less than a 20% deposit can pose challenges, but it’s feasible with certain criteria met:
- Rental yield falls within the range of 5% to 8%
- Minimum annual income of £25,000
- Age requirement of over 21
- Good credit score
Additionally, consider engaging a mortgage broker to assist in finding the most suitable deal.
What types of deposits will lenders accept?
Your buy-to-let mortgage can come from various sources, provided you show proof. These include:
- Personal savings
- Inheritance
- Selling another property
- Mortgaging another property
- Loan from family
How will my deposit affect my mortgage rate?Â
Typically, a larger deposit leads to better mortgage rates and lower interest rates. With a smaller deposit, options may be limited, and lenders might perceive your application as riskier.
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