Buy to Let mortgages are designed specifically for landlords who buy property to rent out. You will be familiar with many of the terms that apply to them already as they are similar in many ways to residential mortgages, but there are differences. It’s also important to understand that except for some very specific circumstances, a conventional residential mortgage cannot be used to finance a buy to let property
First of all, the question of residential mortgages. You may be going away for a prolonged period on business, moving temporarily, or struggling financially. You may wish to rent your home out for a short period. In this case, you would seek “Consent to Let” from your mortgage provider. Each lender is different, so it’s important to have that conversation directly with them to make sure that you are not breaching the terms of your mortgage. So always take advice from your lender on this one.
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There a number of criteria that lenders expect borrowers to meet, but these are very different from the requirements for a conventional residential mortgage.
There are several reasons why you would take on this type of mortgage, but it’s important to remember that buy to let mortgages have very specific uses, and using them for something else can leave you in breach of a lender’s mortgage terms.
This type of mortgage is similar to residential mortgages, but there are some key differences.
There are a number of other considerations before taking out a buy to let mortgage, and these should be considered as part of your business proposition too. Firstly, it’s a good idea to have a contingency plan. There are likely to be times when your rental property is vacant and you need sufficient funds not only to keep up your mortgage payments but find your property as well. If you need to replace a boiler, for example, can you finance it? You may have a difficult tenant and need to cover periods where they aren’t paying the rent. The perfect example is the Covid pandemic, where many tenants have struggled to meet part or all of their rent payments and landlords have had to cover the losses for a prolonged period. How would you cover such eventualities?
Mostly buy to let mortgages are interest-only, so the capital needs to be repaid at the end of the term. Relying on selling the property could present you with a problem if property values have fallen and you can’t meet the mortgage repayment. Remember that when you sell your sale could be subject to Capital Gains Tax, so a sum will need to be deducted for this.
Finally, it’s always a good idea to seek professional advice from a mortgage adviser who will be able to take you through all of the detailed information that you need to understand and help you source the most suitable buy to let mortgage options for your particular circumstances.
Liddle Perrett Ltd is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE