How buy-to-let mortgages work

Buy-to-let mortgages are in many ways just like ordinary mortgages, but they do have some key differences:

  • You cannot reside in a property you own on a buy to let basis
  • Interest rates and fee’s on buy-to-let mortgages tend to be higher than residential rates
  • The minimum deposit for a buy-to-let mortgage is usually a quarter (25%) of the property’s value (some lenders may offer experienced landlords deals with a 20% deposit, but the fees tend to be higher)
  • You can choose between repayment or interest only payment schedules
  • The interest and fee’s paid can be offset against revenue for tax purposes
  • Some lenders allow experienced landlords to obtain a mortgage with no income requirement, as the rental value will be used to cover mortgage payment. This can be useful for higher rate tax payers whose partners do not work, and therefore fall into to lower rate tax bandings.

How much you can you borrow for buy-to-let mortgages

The maximum you can borrow is usually linked to the amount of rental income you might expect to receive. Lenders typically require the rental income you think you’ll make to be in the region of 125-130% of the mortgage payment.

Buy-to-let mortgages on flats, new build properties and properties above or adjecent to commercial properties may require higher deposits for some lenders.

Blue Ocean has helped many landlords build up their property protfolios and can help guide in order to choose the right type of product and repayment plan suited to each clients different and individual needs.