Buy to Let Mortgages Explained

If you’re looking to take out a mortgage for your buy-to-let property, there are some key points to bear in mind. We’ve put together this guide to help you go into the process fully informed.

If you’re looking to take out a mortgage for your buy-to-let property, there are some key points to bear in mind. We’ve put together this guide to help you go into the process fully informed.

Buy to Let Mortgages

What are the criteria for buy-to-let mortgages?

Most lenders will require that you:

  • Are already a homeowner
  • Have a good credit record
  • Earn over £25,000 a year
  • You will be younger than 70 year’s old when the mortgage term ends

How much can I borrow?

Typically, lenders require you to put down a deposit of at least 25%, although this can vary between 20-40%. While they can make exceptions if you have other properties or collateral, this means that in most cases you would only be able to borrow a maximum of 75% of the property price.

You can use our mortgage calculator to below to get an idea of how much you might be able to borrow.

This figure is only an estimate, as lenders will take into account many different factors when calculating the loan amount. In addition, most lenders will conduct a rent-to-interest (RTI) cover calculation, where rental income must be over 125% of your monthly mortgage payments. At Alesco, we only focus on areas that we have forecasted to deliver high rental yields for the foreseeable future.

What payment options are available?

There are two monthly payment options available: interest-only mortgages, where you only pay the interest, and repayment mortgages, where you repay part of the loan in addition to the interest each month.

Most landlords opt for the interest-only option. This means lower monthly payments but as you are only paying off the interest, the full loan amount needs be repaid when you sell or at the end of the mortgage term.

Here’s an example of the difference in monthly payments, based on a comparison website search in August 2016. For a buy-to-let property worth £250,000 with a £125,000 deposit, monthly payments for an interest-only deal were £187.50 and £510.56 for the best repayment mortgage available.

In order to keep up with these payments, it’s important to invest in a property that has good and steady appeal to tenants (e.g. located in an area that is popular with students or young professionals), so that you won’t be left with empty rooms and no rental income.
Buy to Let Mortgage Payments

What if I’m an overseas investor?

With the pound at historic lows, a stable economy, and a shortage of quality rental accommodation, the UK is a great market for overseas investors.

While buy-to-let mortgages rates have traditionally been more expensive for overseas buyers, the recent rise of the long-distance landlord has seen banks expanding their range of overseas and expat options, with much better interest rates, terms and arrangement fees.

If you are one of the almost four million British people living abroad, you may need to go through stricter identity checks than if you were still UK-based but this is par for the course and there are still many potential options. If you already have a UK mortgage, wish to borrow more than £100,000 or work for a corporation with an equivalent salary of £40,000 paid in US dollars or euros then your options are even more plentiful.

Where can I get a buy-to-let mortgage?

Most major banks and building societies will offer buy-to-let mortgages, as well as some specialist lenders. It’s often a good idea to speak to a mortgage broker as they’ll have access to a wide range of options from across different lenders, be able to offer personalised recommendations and usually handle all the paperwork for you.

Our recommended broker is Astute Financial & Mortgage Advisers – an independent mortgage broker that has consistently secured buy-to-let mortgages with great rates for our overseas and domestic investor clients over the years.

They’ll search the whole of the UK mortgage market to find the right mortgage from thousands of deals available. Whether you are just starting to view properties or already have an offer accepted, they’ll be able to guide you through the process all the way to completion. To find out more, you can contact Mark O’Shea on 01642 134100 and

Explore our current buy-to-let opportunities or contact us on +44 (0)203 281 7434 to hear about our latest off-market options.

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