You may already be a landlord wanting to change your mortgage. Or maybe you are becoming a landlord and you are looking into the different Buy To Let Mortgages you can have.
After hitting go on an online search, it can be confusing to understand. There are a variety of Buy-To-Let mortgages to look through. They all offer different rates and it can be difficult to get you hard one. Especially when you only have one question you want answering:
How Much Can I Borrow For A Buy To Let Mortgage?
This blog intends to answer how much you may be able to borrow from a bank for a Buy-To-Let Mortgage.
Firstly, what is a Buy To Let Mortgage?
Also referred to as a BLT or a buy to rent, a buy to let is a property investment. A person with a BLT would buy the property to let out to potential tenants. Therefore, a BLT mortgage is a secured loan against a rental property.
With most high ticketed items such as cars and properties, there is much to consider before jumping in with both feet. As BLT owners must remember that these properties won’t always be profitable.
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Will I need a BLT mortgage is I rent out a property?
The simple answer, yes. The only time that this may be a no is if you already have the cash to buy a property outright.
A BLT mortgage is different type of mortgage. It is special because the owner of the property will not be the main resident and the assessment for the mortgage is slightly different.
Unlike residential property mortgages where you borrow based on your income, a BLT mortgage is mainly assessed on the amount of rent you could generate from the property.
What is the difference between a standard mortgage and a BLT?
The main difference between the two mortgages is the profitability. A BLT is dissimilar as mentioned previously the mortgage will not be based on your personal finances. It will look at how much the property could generate in terms of rent versus the overall cost of the mortgage.
Most BLT lenders will need to have a minimum salary which is usually around £20,000-£25,000.
If you are approved for a BLT mortgage, this will allow you (once you have completed all checks) to rent to potential tenants. Whereas with a residential mortgage, you wouldn’t be able to do this.
Other differences that can be noted between a BLT and residential mortgage are:
- Arrangement Fees – for BLT mortgages, this arrangement fee can be somewhat higher. This fee may be also percentage calculated rather than a flat out fee. Also, conveyancing fees can be slightly higher on a rental property.
- Interest Rates – it is well known that BLT mortgages have a higher set interest compared to residential properties.
- Deposit/Property Value – in comparison to a residential mortgage, BLT mortgages always have a higher minimum deposit. It is typical that you would need to cover 20% of the property value yourself.
So, how much could I borrow for a BLT mortgage?
When it comes to borrowing, for a BLT you can borrow on the amount of income the property is likely to make. Meaning, that depending on the property, you could borrow more money compared to a residential property
If you are wanting to look into more detail about how much you can borrow London & Country have a BLT mortgage calculator. All you do is type in how much rent you expect to receive then it calculates. Also, it compares different BLT mortgages to suit you.
I started writing for PPO back in August 2019. I particularly enjoy writing about new housing developments and upcoming property events.