Buy to Let Mortgages

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Buy To Let Mortgages - Your Frequently Asked Questions

Listen below as Richard Crow talks all about Buy To Let Mortgages

In less than 10minutes, you’ll know a lot more about getting your mortgage sorted.

What is a Buy to Let mortgage and how do they work? 

You need a Buy to Let mortgage for a property that you own, or want to buy, that you want to rent out – you’re not intending to live there.

What is the difference between a Buy to Let mortgage and a residential mortgage?

A Buy to Let property is solely to be rented out, while with a residential mortgage you intend to reside permanently in the property. People often don’t understand that there are different products for different purposes – they see lending as just lending and it shouldn’t really matter. But that’s not the case, and there are specific mortgages for each purpose.

How is a personal Buy to Let different to a Limited Company Buy to Let?

A personal Buy to Let is owned by an individual personally. You’d probably run your letting business as a sole trader – which is typical where people intend to only have one or two Buy to Lets. Speaking to an accountant is always advised, though, as your other earnings may affect that decision.

A limited company Buy to Let is one where you purchase the house through a Special Purpose Vehicle – which is the limited company. The property is solely owned by the company, of which you are a director. This often works for people planning to own a few properties, and people in a higher tax bracket.

Can anyone get a Buy to Let mortgage?

Yes, provided you’re eligible and meet the lender’s criteria. Most lenders prefer that you are what’s called an owner-occupier already, which means that you own and reside in your own property. If you own a property already it lessens the chance that you’re going to move into the Buy to Let – which isn’t allowed under this type of mortgage.

How much can you borrow on a Buy to Let mortgage and what deposit do you need?

People tend to think that the amount they can borrow will be related to their income, so they are surprised to hear that the lending is actually determined by the rent that you will receive from the property.

It’s not really anything to do with the amount you earn. That said, a lot of lenders like you to earn £25,000 and above to cover any gaps in occupancy. But increasingly there are lenders coming into the market that just want to see you are earning and that the income from the rent will pay the mortgage.

In terms of deposit, most of the time you need 25% for Buy to Let. Bear in mind, though, that if the lender won’t lend quite enough due to the rental value, you may find you need to put a little bit extra in. 

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What we really enjoy is being part of one of the most important purchases in people’s lives. It is incredibly special to witness the excitement and emotion when people receive their mortgage offer.

Whether it’s your first time, moving home, investing or just looking for a better rate we would love to hear from you. 

What costs are involved in running a Buy to Let?

It depends where you live and what you are buying, but the main costs are the mortgage arrangement fee, a valuation fee and solicitors’ costs. Don’t forget too that if you already own a property, you will have to pay an additional 3% stamp duty. The more expensive the property, the more you will have to pay.

Is it illegal to rent out a house without a Buy to Let mortgage?

It is illegal and a breach of the mortgage terms.

If there’s a residential mortgage on a property and you decide to move out – you’ve started a new relationship or you’ve got a new job and need to relocate – you must get permission from your lender to let the property.

‘Consent to Let’ gives you permission to let the property in the short term. This should see you through to the end of your fixed term. At that point you’d be expected to move onto a Buy to Let mortgage – unless you have moved back in.

Is it illegal to live in your own Buy to Let property?

It is illegal and a breach of the mortgage terms.

You shouldn’t personally, or let family members live in a Buy to Let property. A lot of people don’t understand why their family shouldn’t live there, but the main reason is because they’re far more likely to think it’s okay to pay the rent late or take a month off the payments.

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

It really all depends on what your plans are. I have clients who have Buy to Let mortgages on repayment as they want the debt to be paid off by retirement to bring in an income. Meanwhile other people choose interest only to have lower repayments, and use the surplus income to put towards further properties or to build up that income for the future.

How many Buy to Let properties can I own?

There’s no specific limit, but what you might find is certain lenders will restrict how much they are happy to lend dependent on the number of properties in your portfolio.

If you own four or more properties you become seen as a professional portfolio landlord, which can make mortgage a little bit more complicated. It becomes more admin heavy – to get a new mortgage we need the details of every single property that you own.

How can a mortgage broker help?

We’re here to help at every step, and will explain everything so you can make an informed decision. If you’re thinking of letting out a property, get in touch and we’ll help you explore the options.

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.  

Some forms of Buy to Let Mortgages are not regulated by the Financial Conduct Authority.

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