If you are looking to buy a property to rent out, you will be known as a landlord and require a Buy-To-Let (BTL) mortgage. The rules are similar to residential mortgages but there are some key differences.
- The fees generally tend to be higher.
- Interest rates are usually higher.
- The minimum deposit is typically 25% of the property’s value, although this can change between lender.
Most BTL mortgages are usually interest-only. This means you only pay the interest element of the mortgage each month and not the capital amount. At the end of the mortgage term, you repay the original loan in full.
If you prefer however, you can chose to get a BTL mortgage on a repayment basis.
Are BTL mortgages regulated?
The majority of BTL mortgage lending is not regulated by the Financial Conduct Authority (FCA) unless you are looking to let the property to a close family member. In this case the mortgage is referred to as consumer buy-to-let mortgage and assessed according to the same strict affordability rules as a residential mortgage.