Buy to Let Mortgage Guide

When you apply for a buy to let mortgage you will either apply as a consumer or a business. Your intent when applying for a buy to let mortgage will determine which category you will fall into.

If you do decide to move out of your property and rent it out to someone else, then you must notify your lender. You don’t want to get into a situation where you risk invalidating your mortgage contract by not notifying them, doing so could give the lender the right to ask you to repay your mortgage back at once.

Some lenders will allow you to let out your home during your residential mortgage for a short period of time, say 1 year. This is called a ‘consent to let’ facility. It is designed to be a temporary solution so you will not be able to keep asking for this service over consecutive years.

If you do decide to opt for a consent to let facility, then you will typically have to pay a higher interest rate. This is because most lenders will deem renting out your property a higher risk.  After the consent to let period is over, you may be able to discuss with your lender the option of re-mortgaging to a buy to let mortgage if you would like to continue to let it out.

A major difference between a buy to let mortgage and a residential mortgage is that your expected rental income is a major factor on determining your eligibility, not your salary. This means that there tends to be no upper age limit because your retirement date (when your salary ceases) doesn’t need to be factored into any repayment term considerations. On the other hand, there does tend to be a lower age limit with most lenders putting the minimum age of 25 for applications.

Usually, lenders will also put a minimum requirement on the property value of a buy to let. In our experience lenders typically won’t lend on properties worth £40,000 or less and some won’t go below £100,000.

There can also be limitations on the type of property, for example some lenders deem certain property types a higher risk. Examples can include flats in a block over 4 floors with no lift, flats in high rise concrete blocks, thatched properties, and properties with external cladding.

Some of the major high street lenders will also not accept properties that have multiple tenancies, bedsits, homes of multiple occupancy (house shares), ‘Related Person’ tenants such as husbands, wives, civil partners, siblings, parents, and grandparents. Buy to let mortgages for holiday lets are typically not accepted with most major high street lenders because they often require letting contracts to be a minimum term of 6 months.

Criteria for a buy to let can sometimes be complex however you can contact Fluent Money and speak to a dedicated mortgage adviser who will be able to talk through your eligibility in more detail. They are always up to date with the specific criteria of the providers on our lending panel and can therefore advise you accordingly.

Fluent Money have a dedicated team of experts that specialise in the buy to let mortgage market. Whether you are a first-time landlord or looking to build a property portfolio, Fluent Money will apply their expertise to negotiate suitable, competitive buy to let mortgage rates on your behalf.

In the buy to let mortgage market, often the most cost-effective deals are only accessible via mortgage brokers such as Fluent Money.

Since 2015, the buy to let mortgage sector has accounted for approximately less than 25% of the total mortgage market share. With lower volumes of cases, it means that not all major high street lenders offer such facilities. The market is made up of a large proportion of specialist lenders because applications for buy to let mortgages have more varying factors than standard mortgages. The added complexity of a buy to let mortgage means they cannot easily be put through the same automated processes as more mainstream mortgages.

Buy to let and traditional mortgage differences

A traditional mortgage is a loan that you would take out to purchase your home, meaning that you intend to live in it. It is not considered a type of investment by lenders, traditional mortgages tend to have lower rates of interest and are regulated by the FCA.

Buy to let mortgage and secured loan differences

A secured loan is different from a buy to let mortgage. A buy to let mortgage will always be the primary mortgage on a property as it is linked to paying the money back that is used to ‘purchase’ a property. Even if you end up an accidental landlord you are still switching your mortgage from a traditional mortgage to a buy to let. A secured loan is a secondary mortgage that if taken out, will be after the primary mortgage.

Buy to let mortgages and equity release differences

An Equity Release Plan is a loan that based on the value of the equity within your home. It is often used by people who want to stay in their own home and don’t want to relocate. There is a minimum age required for equity release plans, you have to be aged 55 or over. Typically people who take out equity release plans do so to release cash to pay for things like home improvements, helping younger family members in ways such as to get on the property ladder or to enjoy retirement in the earlier years. Most plans are designed to repay back the loan at some point in the future.

Buy to let mortgage and bridging loan differences

A bridging loan can also be used to purchase a property for investment purposes however the main difference between a buy to let mortgage and a bridging loan is that a bridging loan is designed to be paid back in the short term. People who take out a bridging loan would normally pay the money back to the lender within 12 to 24 months. They are designed to ‘bridge’ a gap in cash flow for an interim moment. A bridging loan and buy to let mortgage are sometimes used consecutively, for example you may use a bridging loan to pay for a house that is for sale via auction. Once you have purchased the property and carried out any renovations or home improvements , you may then apply for a buy to let mortgage on the property which can then be used to pay off the bridging loan.