Compare buy to let mortgages

Buy-to-let mortgages are for landlords who plan to rent out a property to make money from rental income. The property can also be held as an investment that will increase in value as property prices rise. Consumer protection regulations do not apply to them because they are seen as mortgages for businesses. 

Due to tax changes, many landlords have switched to setting up limited companies to manage their BTL properties. Lenders now offer mortgages specifically for these kinds of limited companies.

There is also a second type of BTL mortgage, known as a consumer buy-to-let mortgage. It is aimed at people who no longer live in their property and would like to rent it out temporarily. 

There are several reasons why this second type of BTL mortgage might suit you, including: 

Consumer buy-to-let mortgages are regulated in the same way as standard residential mortgages.

How much you can borrow largely depends on the rental income you expect to receive. However, your credit score, how much deposit you have, your age and other income sources are also factors lenders consider. 

Your mortgage provider wants to be sure your rental income is enough to cover the costs of being a landlord, not just your mortgage repayments. Buildings insurance, maintenance and statutory checks all need to be covered in addition to the interest payments for your mortgage. Lenders usually insist that the monthly rent equals 125% of the interest payment.

Your mortgage provider will also want to be sure you can still afford to repay the loan if the property is left empty (void) or existing tenants stop paying their rent. You can get insurance to cover these eventualities.

You will usually need a deposit of at least 25% to get a BTL mortgage, although most lenders prefer 40%, giving a loan-to-value (LTV) ratio of 60%. Most BTL mortgages are interest-only loans, which keeps the monthly costs down. The interest rates for buy-to-let mortgages are often a little higher than for standard mortgages. 

Most lenders require borrowers to be at least 21 to apply for a BTL mortgage; if you’re over 70, you may find fewer lenders willing to lend to you.

The bigger the deposit you have to put down on a property, the more choice you have. You’re more likely to secure a lower interest rate too if you have a sizeable amount to put into the property. BTL lenders usually ask for a minimum deposit of 25%, but better deals appear once you have 40%, giving you a loan-to-value (LTV) ratio of 60%. A 75% LTV mortgage can add 10% more to your monthly costs compared to a 60% version.

Interest rates for BTL mortgages are often a little higher than for standard residential mortgages. You can choose from 2 and 5 year fixed rate mortgages, although some lenders offer 10 year fixed rate mortgages. There are also tracker and discounted variable-rate mortgages, and standard variable-rate mortgages that last for the entire mortgage term, although the latter currently tend to cost at least twice as much as fixed and discounted-rate BTL mortgages.

Like residential mortgages, standard loan terms are 25 years. Lenders may impose shorter loan terms on older borrowers and this will increase the monthly interest payment. Remember, if you have a mortgage with an initial fixed or discounted interest period, you should consider remortgaging when it ends – if not, you’re likely to be transferred to your lender’s more expensive standard variable rate.

Product fees can range from nothing to several thousands of pounds. Some have small initial fees and then a larger fee on completion. You may be able to add this charge to your mortgage debt, increasing your monthly cost, but you should avoid doing this if possible as you’ll pay interest on it for the life of the loan. There will be early repayment charges if you switch your mortgage before the end of the initial deal.