Best buy-to-let mortgage

If you're in need of a buy-to-let mortgage, this guide looks at how you can find the best one for your circumstances.

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If you’re using a mortgage to finance the purchase of a new property that you’re intending to let out, then you’ll need a buy-to-let mortgage. You can’t use a traditional residential mortgage for this purpose, so we take a look at how you can go about finding the best buy-to-let mortgage for your needs.

What is the best buy-to-let mortgage?

There’s a range of buy-to-let mortgages out there in the UK market, offered by both mainstream and specialist lenders. The mortgage deal that’s best for you will ultimately be the one that most closely meets your individual requirements.

Here are some factors that you’ll need to consider when searching for the best buy-to-let mortgage for your circumstances:

  • Rental potential. With buy-to-let mortgages, providers will be focusing on the potential rental income of the property you’re buying, rather than your salary, when deciding how much to lend you. So make sure the property you have your eye on can generate enough rent to pay back a buy-to-let mortgage.
  • Application requirements. Do you qualify for the mortgage that you’re hoping to apply for? Is the amount you want to borrow realistic and do you have all the paperwork needed?
  • Monthly repayments. Be sure that the monthly repayments involved are affordable, bearing in mind your rental income, property maintenance costs and landlord expenses.
  • Interest rate. This will affect the setting of your monthly repayment amount, but interest rates vary between providers so make sure you shop around. Your size of deposit and length of term will also affect the interest rate you’re offered.
  • Fees. Sometimes there are application or product fees to pay when taking out a mortgage. You need to factor these in, as a low interest rate may effectively be cancelled out by a high initial fee.
  • Length of term. This is the number of years over which you’ll pay back the mortgage (more on this below).
  • Other conditions. What are the early repayment charges on the mortgage should you decide to sell the property, and can you make overpayments on the mortgage if you want to?

How to choose the best buy-to-let mortgage

If you’re selecting a buy-to-let mortgage yourself, then you’ll need to investigate what’s on offer from a variety of different mortgage providers, using the criteria set out above as a guide to find the best one for you.

If you don’t have the time (or inclination!) to research individual providers, then a mortgage broker might be a better option for you. They often have access to the whole mortgage market (or large parts of it) and will suggest the best buy-to-let mortgages available to you depending on your individual circumstances.

What length of term should you choose for a buy-to-let mortgage?

A mortgage term is the number of years over which you pay your mortgage back, until the amount borrowed (and the interest) is all repaid to the lender. The term length of buy-to-let-mortgages can vary from under 10 years to more than 30 years.

Some buyers prefer a shorter term, so the mortgage balance is paid off more quickly and the property is then owned outright. Others prefer a longer mortgage term because the monthly repayments are lower, as you’re spreading the cost out over a longer period of time.

Bear in mind that the total amount you repay over a longer term mortgage will be higher, because of the additional interest. But the flip-side is that monthly mortgage payments are more manageable, and you may also make more monthly profit from your property’s rental income.

Pros and cons of buy-to-let mortgages

Pros

  • Designed for you to buy a property with the sole intention of letting it out
  • Offered by many lenders in the UK market
  • Available through mortgage brokers
  • Once you’ve purchased a buy-to-let property you can benefit from the rental income profit and growth in property value

Cons

  • Can be trickier to get if you’re a first-time buyer
  • Extra level of stamp duty is payable when buying additional properties
  • You’re liable for the mortgage repayments even if your tenants stop paying their rent
  • Standard buy-to-let mortgages are not regulated by the FCA

Our verdict

Buy-to-let mortgages are specialist products, and only need to be used if you’re purchasing a property for the purpose of letting it out. If the landlord route is one that you decide to go down, make sure you do your research to find the best buy-to-let mortgage that matches your requirements, or alternatively contact a mortgage broker to assist you with this.

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