Simply key in the amount of rent that you currently receive (or expect to receive) and our buy to let mortgage calculator will determine how much we think lenders will be happy to lend to you on a buy to let mortgage. If you don’t have this information already, you can use our rent calculator to get an estimate of how much rent you should be charging.
We’ll also break down the amount you could borrow on a buy to let mortgage into three tiers (red, amber & green) which will give you an indication of how likely it is that you’ll be able to borrow that amount.
Of course, some lenders are more generous than others so this estimate is to be taken purely as a guide, and some lenders will want to look at how much earned income you have from employment or self employment too.
Published 11 December 2018
A buy to let property (sometimes referred to as 'buy to rent' or 'BTL') is a type of property investment, in which the investor becomes a landlord and rents out the property for profit. A buy to let mortgage is a loan secured against one of these properties.
Like any form of investment, there's a lot to consider before you make the jump, as there’s no guarantee you will make any money. This page has been designed to explain buy to let mortgages in a simple way, so if you're a first time buyer of a buy to let property, this guide should help you get things started.
Yes (unless of course you're a cash buyer and don't need a mortgage at all). It's a special type of mortgage based on the fact that you will not be the permanent resident, and so is assessed differently to a normal mortgage. Unlike a residential mortgage, where how much you can borrow is based on your own income (among other things), a buy to let mortgage is assessed mainly on how much rent the property can generate.
Unlike a residential mortgage, where the amount you can borrow is based on your salary and your outgoings, a buy to let mortgage is assessed on the rental income that the property is likely to generate. Lenders will typically need the rental income to be at least 125% of the monthly mortgage payments (on an interest only basis), or even up to 145%, depending on a lender’s criteria.
Most lenders will also require you to be earning an income yourself. Try the buy to let calculator to see how much you could borrow.
A buy to let mortgage differs from its residential counterpart in that it is largely assessed on the property's profitability, i.e. how much rent it can generate vs. the cost of the mortgage – rather than on your own personal financial circumstances.
That said, many buy to let lenders will require you to have a minimum salary, typically £20,000 or £25,000.
Once approved, your buy to let mortgage enables you to rent out the property to tenants, whereas you cannot do this with a residential mortgage.
Other notable differences include:
It's common for the interest rates on buy-to-let mortgages to be higher than residential mortgage rates.
The minimum deposit you need to put down for a buy to let mortgage is higher than it is for a normal residential loan. Typically, you will be required to cover at least 20% of the property value yourself on a BTL mortgage.
Arrangement fees on a BTL mortgage can be higher than on a conventional mortgage. You may also come across more arrangement fees that are calculated as a percentage of the amount you're borrowing, rather than just a flat fee. It is also common for conveyancing costs to be slightly higher for a rental property.
If you're moving home, you may be interested in keeping your current home and transforming it into a property to let – a process sometimes referred to as let to buy.
If you decide to move out of the property you're currently living in and intend to rent it out, you'll need a buy to let mortgage. One option is to ask your current lender for their consent to let the property out, which might involve a fee or switching your mortgage to a higher rate – not all lenders will allow this. Alternatively, you can remortgage to a new lender on a buy to let deal. If you plan to stick with your current lender, you must inform them that you intend to let your home – failure to do so could be classed as a breach of contract.
If you need to release some equity from your current home to fund a new purchase, you can do so during the remortgage process – provided of course that you have sufficient equity and satisfy the lender's criteria.
You also need to ensure certain things are in place like buildings and possibly landlords insurance, as normal policies don’t cover rental properties.
Are you thinking of buying your first buy to let property, or adding to your current portfolio? Do you already have a buy to let mortgage and are looking to switch to a better deal? Contact our expert advisers today.
Please note: although L&C is authorised and regulated by the Financial Conduct Authority (FCA), the FCA does not regulate most Buy to Let mortgages.
We've got lots of useful mortgage calculators to help you find out more about how much you can borrow, what it will cost, what fees will be involved and what else you should consider.