Buy to Let Mortgages

Get in touch for a free, no-obligation chat about how we might be able to help you.

What's On This Page?

Get In Touch
1 Step 1

Buy to Let Mortgages

Charlie talks us through Buy to Let mortgages: how they work and what to consider.

What is a Buy to Let mortgage and how does it differ from a regular mortgage?

A Buy to Let mortgage is where an individual or a company buys a property to rent out. It’s often seen as an investment strategy. You get a mortgage on a property and then you let that property out to cover the mortgage.

What are the eligibility criteria for obtaining a Buy to Let mortgage?

It’s not as strict as it has previously been. For the most comprehensive choice of lenders I would say you need previous mortgage experience and to earn over £25,000 pounds per year. Having said that, I think there is a lender for most people – even if you’re a first time buyer or a first time landlord.

Having an income will certainly give you more options if you’re interested in looking at a Buy to Let mortgage. I would advise you to speak to a broker, as there should be a lender out there for you.

How much deposit is usually required for a Buy to Let mortgage?

Normally you need 20% to 25% as a deposit for a Buy to Let. Again, you’ll get a more comprehensive list of lenders the higher the deposit you put down.

Should I choose interest only or repayment on a Buy to Let mortgage?

It depends on what you’re looking to achieve. Most people choose interest only because it means that your money is liquid and it’s not tied up in the property.

Normally people who take the interest only route will put money aside in a bank account to pay for the maintenance of the property, management costs or income tax bills.

If you leave that aside in a bank account and the rental income keeps building up, you could even use that to purchase another Buy to Let property at a later stage.

On a repayment basis, you’re effectively paying off the mortgage, so the money is tied into the property. To access that you would have to remortgage or sell to draw this money out. Your monthly payments are higher on a repayment basis, so your decision could be led by the interest rates at the time of application.

Are there any specific fees associated with Buy to Let mortgages to be aware of?

Costs are very similar to what you can expect from a residential mortgage. With stamp duty, if you already own a property you would have to pay an additional 3% on top of normal stamp duty charges, based on the current tax rules [podcast recorded in December 2023].

You would also have solicitor fees to pay, with a residential purchase. There also may be arrangement fees and valuation fees. Rental income is taxable, so you would have to pay tax on the rental income you receive. 

Speak To an Expert
The biggest compliment we can have as a broker is when you refer us to your friends or reuse us. It means you’re happy with the service we’ve provided and how we look after your finances.

What factors do lenders typically consider when assessing a Buy to Let mortgage application?

When lenders determine your maximum borrowing, it’s ultimately down to the value of the rental income the property can achieve.

Most lenders assess this based on whether you’re a basic rate or a higher rate taxpayer, and whether you’re opting for a two or five year deal. They will work out what your ‘stress test’ rating would be to calculate your maximum borrowing.

How do I find the right Buy to Let mortgage deal?

I would always recommend seeing a broker for Buy to Let mortgage deals, as there are a lot of eligibility criteria with each lender. Also, your borrowing massively relies on the valuation appraisal, and this can be very different from one lender to another.

As Buy to Lets are typically chosen for investment purposes, a broker will help maximise your profits by getting you the most cost-effective deal to suit your needs.

What steps should a first time Buy to Let investor take before applying for a mortgage?

I suggest they see someone like ourselves. We will be able to guide you in the right direction in terms of what deposit is required and what rental income the property will need to achieve to reach a certain loan amount.

We will give you an indication of monthly costs on a repayment and interest only basis. We can even recommend solicitors and advise you how much stamp duty you’ll have to pay.

Why should clients choose Midas over other brokers for a Buy to Let mortgage?

We’ve got a really bespoke service at Midas. We have specialists in the Buy to Let area for portfolio landlords and limited companies as well as standard Buy to Let.

We can give you advice on what you’re going to be paying, whether you would be able to raise capital and give you ideas of what your investment strategy could be moving forward.

Please note:Your property may be repossessed if you do not keep up with your mortgage repayments.

The Financial Conduct Authority does not regulate some/most Buy to Let Mortgages.