Buy to let Mortgage: The Ultimate Guide

With purse strings tightening across the UK and house prices reaching record highs, more people are being priced out of the housing market.

However, through mortgages, investors can buy property without having the lump sum to hand.

While this isn’t anything new, with most homebuyers resorting to mortgages to deal with hiking costs, one mortgage type you may not have heard of is buy to let mortgages, or BTL mortgages.

Mortgage and property can get complicated, but it doesn’t have to be with the proper research.

In this ultimate guide to buy to let mortgage explained, we will cover every burning question you may have about buy to let properties.

If you’re asking “how much deposit do you need for a buy to let” or want to know how much you can borrow, the fees involved, the buy to let minimum deposit, and everything else in between, we’ve got you covered.

If you have a question about mortgages, chances are you will find the answer here.

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What Is Buy to Let? 

Before we start explaining how does buy to let work, it’s important to understand what exactly is buy to let if you’re a beginner.

Buy to let is when you buy a property to rent for income. There are different types of buy to let, like residential and student, which have their own pros and cons.

Residential buy to let is the more traditional form of the investment type, with investors buying a property to rent to any tenant they want.

Student buy to let is similar to residential buy to let except investors will only rent to students. Student buy to lets are typically cheaper than residential and often come with higher rental returns.

Illustration with text - A buy-to-let mortgage is a mortgage specifically for investors buying property to rent Illustration with text - A buy-to-let mortgage is a mortgage specifically for investors buying property to rent

The average house price in the UK is currently valued at around £250,341, according to the latest data from the UK House Price Index.

While you can buy property for a lot cheaper than this, particularly by buying off-plan, it does mean that buying a house requires a considerable amount of money that you may not have to hand. That’s where buy-to-let mortgages come in.

Buy to Let Mortgage Explained 

A buy-to-let mortgage is a mortgage specifically for investors buying property to rent to a tenant. Mortgage lenders are unlikely to give you a traditional residential mortgage if you intend on buying a property to rent out.  This means, if you’re an investor looking for a mortgage, an investment property mortgage will usually be your main option besides buying the property outright.

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Who Are BTL Mortgages For? 

An investment property mortgage is for those looking to buy a property to rent to a tenant. They can be used by both seasoned and beginner investors but have more rules than a typical residential mortgage.

You will need the money at hand to pay a sizeable deposit. If you’re asking, “how much deposit do you need for a buy to let” you could need up to 40% depending on the lender, with the buy to let minimum deposit usually being around 20%.

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How do buy to Let Mortgages Work? - vector illustration with house, calculator and laptop How do buy to Let Mortgages Work? - vector illustration with house, calculator and laptop

How Do Buy to Let Mortgages Work? 

Buy-to-let mortgages are very similar to traditional mortgages but differ in some ways.

Firstly, most buy-to-let mortgages are interest-only. This means investors will only pay the interest of the loan every month. When the mortgage term ends, investors will have to repay the original loan, known as the capital debt, in full.

Secondly, an investment property mortgage is usually more expensive. Fees are typically higher, as well as interest rates. Minimum deposits can also be higher (normally 25% but can be more), and most BTL mortgage lending is not regulated by the Financial Conduct Authority.

Learn more about mortgage rules and taxes by reading our guide to buy to let rules.

What Is the Difference Between a Buy to Let Mortgage and a Residential Mortgage? 

Unlike more traditional residential mortgages, a buy-to-let mortgage is typically interest-only. This means you only pay the interest of the original loan every month. Your payments don’t reduce the overall amount you owe – the capital debt – unless you make extra payments or take out a repayment mortgage.

By the end of your loan, you will have to pay off the debt. You can make payments throughout the period to reduce this cost or sell the property at the end. You could also take out another mortgage instead of selling.

An investment property mortgage is also more expensive than a residential and requires larger deposits and higher interest rates. If you’re asking “how much deposit for buy to let” you could pay anywhere between 25-40%.

Investors will also have to pay more stamp duty tax on properties that aren’t your primary home.

The average rental value in the UK is £984 per month. This is an increase of 3% compared to 12 months prior. The average rental value in the UK is £984 per month. This is an increase of 3% compared to 12 months prior.

How Much Can You Borrow on a Buy to Let?

The amount of money you can borrow for a buy-to-let mortgage depends on the amount of rental income you expect to earn each month.

Most mortgage lenders will require your rental income to be around 25-30% higher than the monthly interest payments.

To understand how much rent you can charge tenants, it’s essential to research the area you are looking to invest in.

According to the Homelet Rental Index, the average rental value in the UK is £984 per month. This is an increase of 3% compared to 12 months prior.

These rental costs change depending on what area you invest in. Based on Zoopla data, the average rent in London is £2,610. For Manchester, average rent is £1,194. And in Liverpool, rental values are around £826 per month.

So, if you have monthly interest payments of £700, you will need a rental income of around £875-£910 per month, depending on the lender.

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Who Can Get a Buy to Let Mortgage? 

So, what is the buy to let mortgage criteria? There are several buy to let mortgage criteria you must meet to be eligible for a mortgage.

The buy to let criteria is:

  • You need to earn over £25,000 a year.
  • You need to be no older than 70 or 75 by the time the mortgage ends. Most lenders place an upper age limit. For instance, if you get a BTL mortgage when you are 40, a 25-year mortgage term will mean it ends when you are 65.
  • You need a good credit score.
  • You should ideally own a home already (although it is possible for first-time buyers to secure a BTL mortgage).
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It’s also important to realise the risks involved with property investment. As it stands, property is one of the safest asset classes you can invest in, with prices rising consistently over the last 20 years.

Despite this, though, all investments come with risks that need to be acknowledged.

One reason why a buy to let minimum deposit is so high is that you run the risk of void periods.

Void periods are when your property lays vacant, and you are earning no rental income. This is a genuine issue with many investors, which is why it’s so essential to research locations.

Choosing popular cities like Liverpool and Manchester and choosing property types that appeal to your target tenant is vital for success.

Covid-19 has drastically changed tenant habits, with research from Rightmove finding that the three most important factors to a property are space to work from home, fast broadband, and outdoor green space.

Ensure you buy property with these buy to let requirements to minimise the chances of void periods.

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Affordability Checks on Landlords  

The buy to let market has been incredibly popular over the past few years. To cool the market somewhat, the Bank of England imposed stricter affordability checks that are vital to know before getting a buy to let mortgage.

Interest Cover Ratios 

As part of these assessments, interest cover ratios (ICR’s) are used to calculate the level of profit a landlord will make.

The ICR tests if a property’s rental income can cover the landlord’s mortgage payments. It’s tested by using a representative interest rate, which is typically around 5.5%.

Through these checks, lenders test 125% of the potential income, which means your income must be at least 25% higher than your mortgage payments. Sometimes this number can be as much as 45% higher.

Choosing popular cities like Liverpool and Manchester and choosing property types that appeal to your target tenant is vital for success.

Daniel Williams, RWinvest

Typically buy to let mortgages require deposits of 25% although this can vary between 25-40% Typically buy to let mortgages require deposits of 25% although this can vary between 25-40%

How Much Deposit Do I Need for a Buy to Let Mortgage? 

So what’s the deposit needed for buy to let?

Typically, BTL mortgages usually require deposits of 25%, although this can vary between 25-40%.

Overall, this means if you’re buying a property valued at £250,341 (the UK average), you could require a deposit anywhere between £62,585 to £100,136.

Buy-to-let mortgages are often more expensive than traditional residential mortgages, with deposits much higher. This is because lenders seek to protect themselves from the likelihood investors cannot make payments due to void periods.

What Types of Mortgages Are There? 

Now that you know precisely what a buy-to-let mortgage is and if it’s right for you, it’s time to start looking at getting a buy to let mortgage.

There are several different types of mortgages. Each mortgage type comes with its own benefits and will entirely depend on how you want to pay back your loan.

Fixed Rate Mortgage 

A fixed-rate mortgage has an interest rate that stays the same for a period of time from anywhere between two and 10 years.

This is one of the most popular mortgage types as payments are the same every month, making it easier to manage.

It’s important to note, though, that remortgaging within the period can incur financial penalties known as early repayment charges (ERC).

rates from 2% to 4% illustration rates from 2% to 4% illustration

Variable Rate Mortgage 

In a variable rate mortgage, interest rates fluctuate periodically, often in relation to other rates such as the Bank of England.

These rates differ between lenders, with each having its own standard variable rate. Lenders can change this standard variable rate whenever, but it is often in relation to the Bank of England’s rates.

Such rates can change from anywhere between 2% to 5%, and sometimes even higher. It’s essential to research these rates by comparing mortgage lenders before deciding which mortgage to choose.

 

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Consider different kinds of variable rate mortgages Consider different kinds of variable rate mortgages

There are several different types of variable-rate mortgages you can consider.

Capped rate mortgage: A capped rate mortgage limits how high the standard variable rate can grow.

Discounted mortgage: A discounted variable rate mortgage offers discounted rates on the standard variable rate for a set amount of time.

Tracker mortgage: A tracker mortgage offers variable rates that follow the Bank of England’s base rate at a set percentage either above or below it.

Be sure to research each option thoroughly or talk to a financial adviser to understand what is best for you.

Average Buy to Let Mortgage rates graph showing a current growth trend Average Buy to Let Mortgage rates graph showing a current growth trend

What Are the Interest Rates for a Buy to Let Mortgage? 

Based on data found by MoneyFacts in late 2020, BTL mortgage rates have shown a marked decrease over the last six years.

As you can see from the data, the average BTL mortgage rates as of November 2020 were 3.10% for fixed-rate mortgages, and 3.44% for variable rate mortgages.

These figures have dropped from 3.99% and 3.80%, respectively, since November 2014.

Variable rates did record a jump in 2020, rising from 3.10% to 3.44%. Experts claim this increase reflected that most variable mortgages were withdrawn following two consecutive cuts of the Bank of England’s base rate.

Buy to Let Mortgage Calculator 

If you want to work out accurate figures on what you could expect to pay monthly, be sure to check out the top buy to let mortgage or BTL mortgage calculator online.

On the buy to rent mortgage calculator, you can find out how much you can borrow based on the value of the property, length of mortgage, and interest rate.

You can also check out your monthly mortgage costs based on your deposit and interest rate.

Here at RWinvest, we have a fantastic rental income calculator tool to calculate what rental income you will need to afford your property mortgage.

Understanding mortgages has never been easier, thanks to helpful guides from RWinvest.

 

 

Buy to Let Mortgage Calculator

Calculate your buy to let mortgage monthly payments using our buy to let mortgage calculator.

Interest Only £ per month Capital Repayment £ per month

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What Are the Tax Implications of BTL Mortgages? 

While making mortgage payments is undoubtedly an important aspect of property investment, it’s not the only expense you need to consider. With capital gains tax, income tax, and stamp duty tax to keep in mind, you may be spending more money than you first thought.

Thankfully, though, BTL mortgages come with some tax relief, although this has changed a lot over the years and is no longer as beneficial as it has been in the past.

Since 2017, marked changes have been made, restricting the tax advantages attached to BTL mortgages. The way in which landlords have to declare their rental income is now very different.

The most recent change happened in April 2020. Investors are no longer able to deduct mortgage expenses from rental income to reduce their tax bills. Instead, they receive a tax credit based on 20% of their mortgage interest payments.

Tax implications of Buy to Let mortgages Tax implications of Buy to Let mortgages

This lack of tax relief for individuals has led to some landlords forming a limited company. Creating a limited company has several benefits attached to it.

Fundamentally, when buying property as a company, you will get more significant tax benefits than an individual landlord would. In these tax benefits, the mortgage interest receives 100% relief against the property income. As mentioned, for individual investors, this is no longer possible.

Why this sounds incredibly beneficial, the caveat is that interest rates are often higher for companies than individuals.

Also, forming companies isn’t always for everyone and can sometimes require more work than an individual. If you want to know more about property companies and how to create a property business plan, check out our guide.

 

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Remortgaging

With taxes changing considerably over recent years, most notably for buy to let landlords cuts to mortgage interest tax relief, an increasingly popular decision amongst investors is to refinance their portfolios. This is known as remortgaging.

Remortgaging is the process of switching your current mortgage to a new provider in the hope of getting a better deal. This can reduce the number of monthly payments and gives landlords the chance to get another property.

Traditionally, remortgaging has been very successful, with other lenders offering lower upfront rates and cashback opportunities to attract some landlords. However, due to the damning impact of Covid-19, such incentives have dramatically decreased.

Be sure to check out lenders rates and compare using comparison sites to get the best deal for you.

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Portfolio Landlords 

So, are there different rules for portfolio landlords?

A portfolio landlord is usually defined as someone with four or more properties. While you may want to become a portfolio landlord and open multiple mortgages, you may encounter some difficulties in the BTL mortgage process.

If you want to know how to build a property portfolio, be sure to check out our guide.

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More Checks 

Prior to October 2017, portfolio landlords had a lot easier of a time when applying for extra finance. Before this date, landlords only had to provide profit and loss figures when attempting to remortgage their properties, but this is no longer the case.

Instead, more checks are now in place. You will now have to show several aspects of your portfolio like mortgage details, your business model, and cash flow projections for each property in your portfolio.

Some banks even consider your income away from property, such as your annual salary or pension. This is known as top-slicing.

Top slicing can be beneficial. If you’ve just started your property journey but have a comfortable and large salary, you could use your income to bridge shortfalls when being assessed by lenders.

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Restrictions in Place 

As a portfolio landlord, you will face some restrictions depending on what lender you want to borrow from.

Some lenders have implemented restrictions on how many properties you can have in your portfolio, typically up to 10. This can impact the ICRs and their interest rate, meaning you need a higher income to secure a mortgage.

You may also find limits on maximum loan-to-value ratios and even a requirement that your ICR must be over 100% on each of your properties.

This all depends on the lender, so due diligence and research are required to ensure you choose the right mortgage for you.

Unlike more traditional residential mortgages, a buy-to-let mortgage is typically interest-only. This means you only pay the interest of the original loan every month.

Daniel Williams, RWinvest

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First Time Buyers 

You may be surprised to hear that you can secure BTL mortgages even as a first-time buyer. The caveat is it isn’t easy.

Lenders may command an even bigger deposit to secure a mortgage, with the number of willing providers far less than normal.

Another downside is you will be missing out on tax benefits. This is because first-time buyers usually get stamp duty cuts on their first purchase, but only on for homes they intend to live in.

On the plus side, though, you won’t pay as much as ordinary investors would on buy to let properties and will instead be given a home mover rate charge (the same rate as non-first-time buyers purchasing a property to live in).

You need to be careful as a first-time buyer, though. This is because your actions as a landlord will impact your ability to secure a mortgage for a home you intend to live in. Lenders will assess your debt and payments on your BTL mortgage, so be sure to prepare yourself financially.

Buy to Let Equity Loan Buy to Let Equity Loan

Buy to Let Equity Loan 

If you’re a first-time buyer looking to buy property in England, you could consider a buy to let equity loan.

Wannabe homeowners in the country can borrow up to 20% of the value of a property if they have a 5% deposit.

This is part of the Help to Buy equity loan and is interest-free for five years.

You can only qualify as a first-time buyer, though, and it can get complicated, so research is important.

Help to Buy Equity Loan - Eligibility factors Help to Buy Equity Loan - Eligibility factors

There are several factors to a Help to Buy Equity Loan.

They are:

  1. Must be a first-time buyer.
  2. Max property prices depend on location (up to £600,000 in London and £224,400 in the North West).
  3. Must buy a new-build home.
  4. You need at least a 5% deposit.
  5. You will still need a mortgage for the amount not covered.
  6. The loans are interest-free for five years.

To read more about equity loans and if they’re right for you, read this guide.

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Risk of Invalidating Mortgage Risk of Invalidating Mortgage

Accidental Landlords 

Let’s say you’ve inherited a property and have been forced through circumstances to rent it out. What next?

Well, if that property has an outstanding mortgage, you must inform your mortgage lender you intend to rent out the property.

This is because buy to let properties are riskier for lenders due to void periods. If you don’t tell your provider, you run the risk of invalidating your mortgage.

How to choose the right mortgage How to choose the right mortgage

How Do I Choose the Right Mortgage? How to Find the Best Deal

Choosing buy-to-let mortgages can be a challenging prospect. With so many factors to consider, you may find the process overwhelming.

Before starting your journey, you should consider the following factors.

  • How much you can borrow
  • Deposit size
  • Interest-only or repayment
  • Type of rate: Fixed or variable?
  • What mortgage fees are there
  • What mortgage penalties are there
  • Interest rates

There’s a lot to consider here, which is why research is key.

Buy to Let Mortgage Fees Buy to Let Mortgage Fees

Mortgage fees can be especially damaging and you need a keen eye to make sure you aren’t paying more than you need.

These fees come in several different forms. They are:

Arrangement fees: Arrangement fees are paid to the lender for setting up your mortgage. It can range from free to up to £2,000.

Valuation fees: The lender will conduct a valuation on your property to make sure it’s worth the price you are looking to pay.

Legal fees: Fees covering any legal proceedings when setting up the mortgage or switching your deal.

You should also consider early repayment charges (may get charged if you pay off your mortgage early by moving home or remortgaging), cashback incentives, and the annual percentage rate of charge (APRC).

Be sure to use comparison sites or talk to lenders to make sure you’re getting the best deal available.

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What Are the Taxes Involved With Buy to Let Property? 

There are several types of buy to let tax you need to consider before starting your investment journey. These taxes are capital gains tax, stamp duty land tax, and income tax.

Capital Gains Tax 

Capital gains tax is a tax you pay if you profit when selling a property that is not your home. You only pay this tax if the property is buy to let, a business premise, land, or an inherited property. Upon selling the property, you must report and pay any capital gains tax within 30 days.

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Property investment is at its best when you keep hold of property for several years to get the best profit possible. While you will pay more tax, it is still ideal for making as much money as possible. That’s why it’s important to invest in high-growth areas.

As it stands, the North West has the highest predicted growth over the coming years, with Savills’ latest predictions suggesting a 28.8% growth by 2025. This is 7.7% higher than the UK average and over double that of London.

Manchester prices over the last 20 years have grown by 353.64%. This shows the benefit of investing early, so be sure to consider your options before prices start significantly rising over the coming years.

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Income Tax 

In buy to let property terms, income tax is a tax you pay on your earnings through rental income and can be worked out using a buy to let calculator.

Income tax is based on three factors:

  1. How much you earn through rent
  2. If you live in the property
  3. How much you earn from other income sources

Using a buy to let calculator for rental income, if you earn the average UK rent (£984 PCM) as well as the minimum salary needed for a BTL mortgage (£25,000), you could pay around £1,649 in rental income tax.

Of course, this is just a rough indicator without factoring in other expenses and mortgage repayments.

To get a full view of your situation and how much you can spend on income tax, check out this buy to let calculator.

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Inheritance Tax 

Inheritance tax is a tax paid when you inherit a property. This will only be considered by an investor if they decide to rent out the property.

Inheritance tax can be up to 40%, which may force you into selling the property.

Stamp Duty Land Tax 

Stamp duty is a tax paid by those in England and Northern Ireland when buying property. It has other names in Scotland and Wales, known as Land and Buildings Transaction Tax and Land Transaction Tax.

In July 2020, this tax had been temporarily cut thanks to the stamp duty holiday, designed to promote continued property purchases despite the Covid-19 pandemic.

Median Approval Times for Buy to Let Mortgage Median Approval Times for Buy to Let Mortgage

The holiday was significant thanks to the amount of savings buy to let investors can make. On average, investors saved around £4,500 on property purchases, with potential savings up to a sizeable £15,000.

Previously set to end in March 2021, the holiday was extended until June 2021, meaning investors had even more time to make considerable savings on their investments.

This led to a huge surge in demand for property and growing pressure on mortgage lenders that’s still being felt today.

With that in mind, research from Trussle in 2021 calculated the median approval time of the top five UK mortgage lenders to help you start your investment as quickly as possible amid this high demand.

Buy to Let Mortgage Approval Times by Region in the UK Buy to Let Mortgage Approval Times by Region in the UK

Of course, every mortgage application can heavily differ, depending on the property’s location and finances.

Further data from Trussle found that mortgage approval times can heavily differ between UK regions.

Considering these locations and lenders could help you buy a property before the deadline. It goes without saying, though, that you should still invest in the best locations for property with the highest growth rates, rather than considering mortgage approval times as the defining factor.

There are several different types of mortgages. Each mortgage type comes with its own benefits and will entirely depend on how you want to pay back your loan.

Daniel Williams, RWinvest

What Other Fees Are Involved With Buy to Let Property? 

Aside from taxes and monthly mortgage payments, there are several other additional fees to consider when investing in property.

Survey Fees

Upon purchasing a property, you may want surveys done to understand the conditions of the property. While this is unlikely to be a problem on new-builds, older properties may have wear and tear that needs repairing. Surveys like a snagging survey can cost anywhere between £300 to £600.

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Property Management 

If you live away from your buy to let properties, either in another country or city, you may find it difficult to keep on top of your landlord duties. To avoid this, a lot of investors decide to employ the services of a property management company.

Property management companies cover all day-to-day tasks of a landlord, such as finding tenants and getting rent. They also act as a point of contact for tenants, so the property owner can have a completely hands-off investment. These companies can charge the owner a flat fee or a percentage of their monthly rental income, which can fall anywhere between 5-15%.

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Landlord Insurance

While not a necessity, many investors opt to pay for landlord insurance as an extra layer of protection. Landlord insurance comes in many forms and is incredibly similar to home insurance, except it is specific to rental properties.

Buildings Insurance 

Buildings insurance covers any damage to your rental property’s structure and can help cover the costs of rebuilding a home if there’s irreparable damage.

This covers damage from burst pipes, fire, water, theft, and vandalism.

Contents Insurance 

Contents insurance covers the lost of repairing and replacing furniture and fittings like carpets and electrical items.

This only covers items owned by the landlord, with personal tenant items not covered by the policy.

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Rent Guarantee Insurance 

Rent Guarantee Insurance protects landlords if tenants fail to pay rent or a void period occurs when the property is vacant.

This type of policy can cover lost income and legal expenses if an eviction is required.

Home Emergency Cover 

Home emergency cover protects landlords against any loss of essential services in a rental property.

This can include roofing problems, drainage issues, plumbing difficulties, loss of electricity, and even lost keys.

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Solicitor Fees 

Another fee you need to consider is solicitor fees. When purchasing a property, you will need to work with a solicitor to help you with legal documents like contracts.

Safety Checks and Maintenance 

As a landlord, you must ensure the property is safe and maintained for your tenants. This means you will have to consider several checks which can incur charges.

Such things you need to consider are:

  • Annual safety checks on gas appliances
  • Safety checks for electrical appliances
  • Installing smoke alarms
  • Ensuring there’s a clear fire escape route
  • Repairing any faults that may arise
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Choosing a Buy to Let Property 

Getting a buy to let mortgage is only one aspect of property investment; you need to also choose the property itself.

Choosing the right property is incredibly important in ensuring the success of your venture. You don’t want to invest in an area with falling growth rates or low tenant demand as you set yourself up for failure.

There’s three vital buy to let requirements you need to consider when investing in property. They are:

Target Tenant 

For a target tenant, the two main choices are student tenants or non-students tenants. Your target tenant will impact what type of property you buy.

When investing for students, you will want to invest in popular student cities, such as Liverpool and Manchester, and provide modern, well-equipped properties or apartments.

If you are targeting a family of four, you will likely want to invest in a house in a more suburban area.

Property Price Predictions Property Price Predictions

High Growth Areas 

Location is another important factor to consider. Investing in areas with the highest growth rates is important for future success.

According to the latest Savills data, property price growths heavily fluctuate between each region.

As you can see, the North West currently has the best price growth rates. Investing in an area such as this will give you the best chance of making a successful investment.

Liverpool L1 City Centre Postcode

The Mill

Invest From £39,950

Liverpool Prices from £139,950

Assured 6% NET Rental Return

Grade 2 Listed Building

Exclusive Payment Structure

One Park Lane

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Liverpool Prices from £129,950

6% Assured Net Rental Return

16 Storey Skyscraper

Invest With £29,990

Heaps Mill

Exclusive RWinvest Opportunity

Liverpool Prices from £124,950

7% Assured Net Rental Return

Deposits From as Little as 15%

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You can expect higher capital growth depending on the price of property. Off-plan properties typically offer the best capital growth rates thanks to below-market prices.

Off-plan properties are properties that are in the development or planning stage but can still be purchased. The main benefit of off-plan property is the price. For instance, one of our Manchester properties, Merchant’s Wharf, can be bought for 55% below market value.

If you need a mortgage to pay for off-plan property, you may struggle, as it is complicated to secure one for this type of property.

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Rent and Rental Yields 

Another aspect to consider is rent and rental yields.

Rental yield is the return on your investment you make through rental income. It is calculated by finding your yearly income, dividing it by the purchase price of your property, then multiplying it by 100.

Currently, the average UK rental yield is 4.69%. The highest yields can be found in Manchester and Liverpool, which have yields of 7.14% and 6.69%, respectively.

Rental income is also set to grow over the coming years, with Savills recording a predicted 17.0% growth in UK rent. This increase is in line with UK income growth, which is slightly higher at 17.3%.

Investing in high yieldings areas with future growth is an essential buy to let requirement to consider.

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FAQ’s Part I

To help answer all your queries on buy to let mortgages, check out our detailed FAQ section. This section answers all the common questions you may have about buy to let property

According to the UK House Price Index, the average UK property is valued at £250,341. The average UK flat is valued at £214,114.

Most buy-to-let mortgages are interest only. There are increasingly popular alternatives, though, such as repayment mortgages.

At the end of a buy to let mortgage, you will have to repay the full value of your mortgage – known as the capital debt. You can extend your mortgage or sell the property to pay off the loan.

There are plenty of mortgage lenders out there. You should use comparison sites to compare rates and identify what mortgage is right for you.

No, it isn’t illegal to live in a property you purchased with a buy to let mortgage. However, it is often a condition of the mortgage that you should rent the property out to tenants.

It is possible to get a buy to let mortgage with no income as some lenders don’t require proof of income. However, some require a minimum annual salary of £25,000.

Yes, buy to let is a good investment at the moment. This is because you can earn two forms of income, rental income, and capital gains. Property prices have increased consistently over the last 20 years (300% since December 2000), making it one of the most secure asset classes.

No, you will always need to pay a deposit to get a buy-to-let mortgage, which is usually around 25%.

A deposit for a £60000 buy-to-let mortgage could cost anywhere between £15,000 to £24,000.

So, what is the buy to let criteria?

To get a BTL mortgage, you need to earn over £25,000 a year, be no older than 70 or 75 when the mortgage period ends, have a good credit score, and should ideally own a home already.

How Much Does a Buy to Let Property Cost?

According to the UK House Price Index, the average UK property is valued at £250,341. The average UK flat is valued at £214,114.

Are Buy to Let Mortgages Interest Only?

Most buy-to-let mortgages are interest only. There are increasingly popular alternatives, though, such as repayment mortgages.

What Happens at the End of My Interest-Only Buy to Let Mortgage?

At the end of a buy to let mortgage, you will have to repay the full value of your mortgage – known as the capital debt. You can extend your mortgage or sell the property to pay off the loan.

Where to Get a Buy to Let Mortgage?

There are plenty of mortgage lenders out there. You should use comparison sites to compare rates and identify what mortgage is right for you.

Is It Illegal to Live in a Buy to Let Property?

No, it isn’t illegal to live in a property you purchased with a buy to let mortgage. However, it is often a condition of the mortgage that you should rent the property out to tenants.

Can You Get a Buy to Let Mortgage With No Income?

It is possible to get a buy to let mortgage with no income as some lenders don’t require proof of income. However, some require a minimum annual salary of £25,000.

Is a Buy to Let a Good Investment?

Yes, buy to let is a good investment at the moment. This is because you can earn two forms of income, rental income, and capital gains. Property prices have increased consistently over the last 20 years (300% since December 2000), making it one of the most secure asset classes.

Can You Get 100 per cent Buy to Let Mortgages?

No, you will always need to pay a deposit to get a buy-to-let mortgage, which is usually around 25%.

How Much Would a £60000 Buy to Let Mortgage Cost?

A deposit for a £60000 buy-to-let mortgage could cost anywhere between £15,000 to £24,000.

What Is the Buy to Let Mortgage Criteria?

So, what is the buy to let criteria?

To get a BTL mortgage, you need to earn over £25,000 a year, be no older than 70 or 75 when the mortgage period ends, have a good credit score, and should ideally own a home already.

If you want to work out accurate figures on what you could expect to pay monthly, be sure to check out the top buy to let mortgage calculator

Daniel Williams, RWinvest

FAQ’s Part II

Continuing our buy to let mortgages FAQ’s, the following section features even more answers to your commonly asked questions.

Yes, you can remortgage a buy to let property. This could help save you monthly payments, which you can then put towards a deposit on another property if you wanted to expand your portfolio.

Most lenders will want you to earn over £25,000 a year to secure a BTL mortgage.

So how much deposit for buy to let?

For a buy-to-let mortgage, you can expect to pay around 25% of the property price, with some lenders asking for up to 40%.

How does buy to let work? Buy to let is the idea of purchasing a property to rent out to a tenant.

If you’re asking, “how much can I borrow on a let to buy mortgage” it depends on several factors such as income and rental income per month. You can calculate how much you can borrow through an interest only buy to let mortgage calculator

If you want to know “can I remortgage to buy to let” then yes, you can remortgage your residential property and change it to a buy to let. You typically need to do this before you start renting, or you could invalidate your current mortgage.

If you’re asking, “can I change my mortgage to a buy to let” then yes. You can remortgage your current property and change it to a buy to let.

Yes, if you want to start living in your BTL property, you will need to consider remortgaging buy to let to residential. The Financial Conduct Authority says you must do this even if you intend to live there for a single night.

So you want to know how does rent to buy work UK?

Rent to buy is a government scheme designed to help people afford their first home.

In the programme, the UK government gave home builders to provide properties available for first-time buyers to rent at 80% of the market value for a minimum of seven years. The extra 20% was then used to build up a deposit to buy the house. There was no obligation to purchase, though.

The scheme isn’t available everywhere in the UK.

Can You Remortgage a Buy to Let Property?

Yes, you can remortgage a buy to let property. This could help save you monthly payments, which you can then put towards a deposit on another property if you wanted to expand your portfolio.

How Much Do I Need to Earn for a Buy to Let Property?

Most lenders will want you to earn over £25,000 a year to secure a BTL mortgage.

How Much Deposit for Buy to Let?

So how much deposit for buy to let?

For a buy-to-let mortgage, you can expect to pay around 25% of the property price, with some lenders asking for up to 40%.

How Does Buy to Let Work?

How does buy to let work? Buy to let is the idea of purchasing a property to rent out to a tenant.

How Much Can I Borrow on a Let to Buy Mortgage?

If you’re asking, “how much can I borrow on a let to buy mortgage” it depends on several factors such as income and rental income per month. You can calculate how much you can borrow through an interest only buy to let mortgage calculator

Can I Remortgage to Buy to Let?

If you want to know “can I remortgage to buy to let” then yes, you can remortgage your residential property and change it to a buy to let. You typically need to do this before you start renting, or you could invalidate your current mortgage.

Can I Change My Mortgage to a Buy to Let

If you’re asking, “can I change my mortgage to a buy to let” then yes. You can remortgage your current property and change it to a buy to let.

Is Remortgaging Buy to Let to Residential Possible?

Yes, if you want to start living in your BTL property, you will need to consider remortgaging buy to let to residential. The Financial Conduct Authority says you must do this even if you intend to live there for a single night.

How Does Rent to Buy Work UK?

So you want to know how does rent to buy work UK?

Rent to buy is a government scheme designed to help people afford their first home.

In the programme, the UK government gave home builders to provide properties available for first-time buyers to rent at 80% of the market value for a minimum of seven years. The extra 20% was then used to build up a deposit to buy the house. There was no obligation to purchase, though.

The scheme isn’t available everywhere in the UK.

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Disclaimer:

This is just a guide to buy to let mortgages and should not be taken as financial advice. If you want buy to let advice for first time buyers and want to learn more about buy to let requirements, seek the help of a professional adviser. To work out your potential expenditure, your own research is needed. Use a mortgage calculator for UK buy to let online.

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