A starting place for your Buy to Let questions
All your Buy to Let FAQ’s in one place but if you have any others don’t hesitate to get in touch!
What is a Buy to Let?
An investment property bought to rent out for an income. Like all investments there is a lot to consider before making the commitment but there is potential to make a profit. A BTL mortgage can be used to finance the property.
How is a BTL mortgage different?
It is a mortgage designed specifically with the intention of the property to be rented out. It therefore gets assessed on the rental income (instead of your personal earned income). Lenders will also take into account the debt service coverage ratio.
How much can I borrow?
This depends on the on two factors – the loan to value and the rental income available. The debt service coverage ratio means lenders will only lend if there sufficient margin between a “stressed” mortgage repayment and the rental income, this is to protect you if interest rates rise.
How much deposit do I need?
Minimum deposits usually start at 25% (or a 75% LTV mortgage) although we do have access to lenders who offer 80/85% mortgages.
What is the difference between a Buy to Let and HMO?
House in Multiple Occupancy is where a single property is let to 3 or more tenants and the toilet, bathroom or kitchen is shared whereas a Buy to Let is let on a single AST. Depending on the area, property and number of tenants a HMO license might be required.
What is a AST?
Assured Shorthold Tenancy agreement, this is agreement between the landlord and tenant to pay rent and the rights/conditions involved. Nearly all lenders will require one in place for a BTL mortgage.
Are there any restrictions on property types?
There can be but it depends on the lender as each has varying criteria to accommodate different types of enquiries. For example some lenders do not consider ex local authority properties whereas some do, others consider flats above shops as commercial lending.
See our general FAQ’s for other mortgage questions answered in addition to these Buy to Let FAQ’s.