A Buy to Let mortgage is a mortgage sold specifically to people who are buying a property for investment purposes, rather than as a place to live.

If you plan to rent out a new property, all lenders will require you to get a mortgage specifically for this need rather than a standard residential mortgage.

The majority of clients take out an interest-only mortgage on their let property. They then only pay the interest on the loan as it accrues every month from the proceeds of the rent they collect. The amount of capital owed will not reduce however this will be repaid at the end of an agreed term, normally via sale of property.

Most Lenders will require you to have a larger deposit than a residential mortgage, normally around 20-25%.

Once you own a property, you can profit from it in two potential ways:

 

  • Rental yield – what your tenants pay in rent, minus any maintenance and running costs, such as repairs and agent fees.
  • Capital growth – the profit you earn if you sell your property for more than you paid for it.

 

The majority of buy to let purchases now attract an additional 3% stamp duty surcharge. There is also a lower starting threshold of £40,000 which means nearly all buy to let purchases will now be subject to stamp duty.

Above the £40k threshold, the higher stamp duty rate will apply to all buy to let purchases unless the purchaser does not already own other residential property.

Your property may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate some forms of Buy to Lets

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