Mortgage advice for buy-to-let properties

Buy-to-Let Mortgages

Buy to let mortgages are suitable for many people. Whether they’re current homeowners or first-time home buyers, there are many avenues to take when it comes to obtaining a buy to let mortgage. 

Our financial advisors talk you through the process of buying to let, assess your current and future financial circumstances and communicate with you to establish the best course of action when it comes to buy to let mortgages.

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Understanding your mortgage

What is a Buy-to-Let Mortgage?

What is a Buy to Let Mortgage?

A buy to let mortgage is for landlords who wish to rent out a property. Instead of getting a mortgage for a property to live in, a buy to let mortgage is specifically designed for people who are looking to purchase a property for the sole purpose of renting out to external tenants.

Buy to let mortgages tend to be interest-only mortgages, which means you only interest each month, and not the capital amount. This means at the end of the mortgage term you are required to repay the full loan amount.

How much deposit do I need?

The deposit needed for a buy to let mortgage differs between mortgage providers, and also depend on the applicant’s financial circumstances. Usually, a buy-to-let mortgage requires a larger deposit and will incur a higher rate of interest. This is because lenders often seek extra security, considering that there could be periods with no tenant while renting out a property, or the tenant may fail to keep up with their payments.

How much money can I borrow?

The amount of money you can borrow for a buy to let mortgage will depend on a number of things, including how much rent you will expect to get from the property. Most buy to let mortgage providers will expect you to receive an additional 25% rent income over the mortgage payments. 

It is a good idea to establish with local estate agents what the estimated cost of rent will be on the property you are looking to let. 

Talk to us today to find out how we can help you manage your buy to let mortgage deposit, and establish a ground network for you to move forward with your buy to let property.

How does a Buy to Let Mortgage Work?

Whilst buy to let lenders have their own requirements for applicants, most buy to let mortgages will require similar things from their applicants:

Eligibility: buy to let mortgage providers will assess your current financial circumstances to establish whether you are eligible for a buy to let mortgage. These include affordability, current and future debt, credit history, deposit amount, age of borrower, borrowing status, and whether or not you are a UK resident. 

Borrowing limits: the maximum amount you can borrow for a buy to let mortgage depends on your income status, and how much you are looking to obtain from rental income. In most cases, a buy to let mortgage provider will require you to be receiving an additional 25% – 30% of your mortgage repayments. All of these things factor into how much a mortgage provider will be willing to lend you.

Rates: though most buy to let mortgages are interest-only schemes, other options are available with certain providers. In some cases, you can be eligible for repayment schemes that allow you to repay your mortgage over a period of time, rather than in one lump sum when your mortgage agreement is over.

Buy to Let Mortgages for First Time Buyers

It is also possible for first-time buyers to invest in a buy to let mortgage before investing in a mortgage for a property to live in. In these cases, the requirements of first-time buyer applicants will differ from non-first-time buyers.

In most cases, a first-time buyer will most likely require a larger deposit for their buy to let mortgage as the number of mortgages available to them will be significantly smaller. 

If your first mortgage is a buy to let mortgage, you will not qualify for stamp duty or any other first-time buyer benefits. You will however qualify for the “home movers” rate, which can be cheaper in the long run over first-time buyer relief schemes.

It may also be more difficult for you to obtain a mortgage for a home to live in when the time comes. This is because most mortgage lenders will assess your current debt, which will be significantly higher if you have a current mortgage on a buy to let property. 

How our Buy to Let Mortgage Advisors Can Help

Plan for no rental income: there may be times when your buy to let property is untenanted. We’ll help make sure you’re prepared for these times of absence to ensure that you are financially secure in the meantime. 

Don’t rely of the sale of the property: managing your mortgage repayment is a big part of whether your lender will grant you an initial buy to let mortgage. Ensuring that you are gaining enough income from your rental property and other means is essential to paying your mortgage back without relying on the sale of the property.

Long term investment: investing in a property to rent is a long term investment that requires thorough and conscious planning. We’ll make sure that you are fully aware of the commitments and other opportunities that are available when renting out a property.

Mortgage deals to suit your needs: we’ll discuss with you to understand what it is that you want from your buy to let mortgage, ensuring that your financial goals and needs are met and that your new mortgage is manageable and sustainable. 

Buy to Let Mortgage Advisors

Here at Rhodes Wealth Management, our financial advisors work one-on-one with you to establish a key relationship with you, holding communication at the core of ideals. We think it’s important that you understand what buy to let options are available, and discuss them with you to ensure that you are happy with the decisions you make.

For more information, contact us today to find out how we can help with your buy to let mortgage.

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