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Buy to Let’s for the Portfolio Landlord to the First Time Buyer

A buy to let mortgage is a mortgage on a property where the intention is to let the property out rather than live in it yourself. This can be set up on a new purchase, a property you already own, or one that has been inherited.
There are many different options available with different rules and tax implications to consider, so taking the right advice is important.

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When you intend to buy a property to rent it out, turn it into a recreational respite from hectic city life or a sensational sleepy getaway for holiday goers, you’ll need a buy-to-let mortgage.

With a buy-to-let mortgage, you let out your property rather than live in it yourself. It’s a great way to invest money and also earn income passively, but the prospect of letting out a property comes with a slew of tax and mortgage implications that could make you think twice about this amazing opportunity.

Worry not, here at the Mortgage Broker we have specialist advisors to help you navigate the world of buy-to-let mortgages. Working with one of our advisors, we’ll discuss all your options for setting up a buy-to-let mortgage for your new purchase, a property you already own or one that you have inherited.

  • Looking to create an investment out of a property?
  • Going to rent out a property that you own?
  • Need to know your buy-to-let mortgage options?

How to get a buy-to-let mortgage

Buy-to-let mortgages work differently than your standard residential mortgage. It is a type of mortgage sold specifically to someone looking to rent out a property, rather than live in it.

There are many options available through the high street and specialist lenders, a dizzying array of options in fact. We cut right through the noise to discover the best deals for your circumstances. With only a few details from you, we’ll get to work.

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All you’ll need to do is sit back, put your feet up and relax, while we hunt down the most favourable rates to get you into a buy-to-let mortgage as painlessly as possible.

By getting buy-to-let mortgage comparisons from an incredible range of lenders across the country, including specialist lenders, we’ll be able to find deals you won’t find anywhere else on the market.

How do buy-to-let mortgages work?

The amount you’ll be able to borrow for your buy-to-let mortgage is based on the rental income you are going to get from the property. This will be taken into consideration as well as your personal income.

The basic steps to your buy-to-let mortgage are:

Put down your deposit

The deposit for a buy-to-let mortgage is typically expected to be higher than you would find for a normal residential mortgage. You will need up to 25% of the total value of the property to use as a deposit, though this can vary depending on the lender.

Make repayments

A buy-to-let mortgage is usually an interest-only mortgage. What happens with this type of mortgage is that you’ll pay the interest every month but not touch the actual capital amount of the property.

Pay the whole amount

At the end of your interest-only mortgage term, you repay the entire capital debt which is the value of the property. This may sound risky but with the accumulative profit from the rent saved into an ISA, or by selling the property, you’ll easily be able to pay back the full amount.

This is the most typical option for those wishing to buy-to-let. There are many other options available and different types of mortgage you can choose from, each with its strengths and weaknesses. In discussion with one of our mortgage advisors, we’ll be able to point you in the right direction.

What are the benefits of a buy-to-let mortgage?

The potential for future earnings is very high – Property values have increased in the UK over time. This is a trend that won’t necessarily continue forever but in general, property is seen as one of the most stable investments you can make. The potential for long-term gains is excellent when compared to other methods of investment.

Passive income – Having a stream of rental income will give you steady revenue that you require very little work to gain. Like everything, this is no guarantee and can depend on how you manage the property and your tenants. Having a rental property is a great way to generate extra income, and though the initial amount of work may be intensive, afterwards, you will reap the rewards.

Building your investment portfolio – It’s always better to diversify your investments if possible. Adding a buy-to-let property does just that; spreading the risk of your investments over different types of assets increases the probability of a steady return.

Payments in-line with inflation – The value of your second home as well as rent costs usually increase in tandem as interest rates change. This is somewhat of a double-edged sword as inflation can skyrocket (as we’ve seen in recent times), leading to rents spiralling out of control to cover the costs of paying the interest on the home.

Even including periods of potential instability, in the long run, a buy-to-let property offers far more benefits than other types of investment.

How much will my buy-to-let mortgage cost?

The amount you’ll be able to borrow depends on a number of factors:

This is a calculation of the expected rental income from your property. Historically, this calculation was a straightforward multiplier but now each lender uses their own calculator. The calculation is different for tracker rates and varied fixed terms. Whether you are a basic or higher rate taxpayer will also be taken into consideration. You’ll usually need your rent to be 125% of your mortgage payments.

In a nutshell, the more money you use as a deposit, the smaller your mortgage will be. Pretty basic but being able to use the largest deposit possible is going to mean you are less of a risk from a lender’s point of view; important when getting a second property. The financial implications of owning more than one property could be risky so lenders typically ask for 25% of the value of the home as a deposit.

With an interest-only mortgage, you’ll only be paying back the interest each month. The advantage of this is that your repayments will be much lower than those of a normal residential mortgage.

You won’t have to pay back the full amount of your mortgage loan until the end of your term.

If your Loan to Value (LTV) is low, then you’ll have less to pay back on your mortgage. An LTV is expressed as a percentage of your property value and is the percentage of the amount you have left to pay on a mortgage. If you have a very high deposit then your LTV will be lower.

Assessing your credit history is extremely important to lenders in order to determine the amount they’ll lend you as well as the risk to them.

A variable rate will cause the amount of your repayments to change in line as the interest rate changes. A fixed-rate keeps your interest rate at a set level for a fixed period of time. Both types have advantages, though if you go through a period of volatility in the interest rate then you may end up paying more per month.

Take a look at our buy-to-let mortgage calculator to get a rough idea of the amount you will be able to borrow based on a few personal financial details.

Types of buy-to-let mortgage

There are many choices to consider when getting a property that you want to buy-to-let. You also have a lot of options based on your particular life circumstances; you don’t have to be a property magnate to start investing in property. Let’s take a look at the various types of buy-to-let mortgages.

First-time buyers

To be a true first-time buyer, you have to have never owned a property. Even though you’ve never owned a property you still have the option of purchasing your first property as an investment. We can advise about specific lenders that will allow you to get a buy-to-let mortgage as a first-time buyer.

First-time landlord

You’ll be someone who has never had a buy-to-let mortgage but owns your own property. You will have the choice to let out your own home or you’ll have bought a new property with the intention to rent it out.

Limited company buy-to-let mortgage

It can actually be advantageous to buy a rental property under a limited company name instead of your own name. This is because there have been a variety of tax changes over the years which will benefit you, should you decide to go this route.

The company you use must be set up specifically to buy and let property, with lenders having specific criteria for you to follow in how the company is structured. Because of this, we would highly recommend speaking with a mortgage advisor to go through all of the implications you need to think about before deciding it’s right for you.

Standard let

The most common option. This is when a property is let to one family, on one tenancy agreement for a set rent amount every month.

House of multiple occupancy

The House of Multiple Occupancy (HMO), is rented to a group of unrelated individuals. The rooms will be rented on a room-by-room basis and you can even have different rent rates per room with multiple tenancy agreements running at once.

An HMO usually covers anything from 2 rooms up to a whopping 10-20 individual rooms! Added to this you will also have communal kitchens and bathrooms.

When your rental property is an HMO, you’ll find that many local authorities require specific licensing. Most mortgage lenders will expect that you are an experienced landlord if you’re looking at HMO tenancy for your buy-to-let property. This indicates that you will be able to deal with the added complications of a multiple-tenancy home and are therefore seen as less of a risk.


A multi-unit building is one in which a house has been converted into flats. This usually takes the form of major renovation works carried out in a home that converts it into a liveable space for many individuals who live together but in separate parts of the building.

Each flat has its own separate entrance, exit, bedroom, bathroom and kitchen for the sole use of one tenant and not shared with any of the others.

As with HMOs, a lender will look for experienced landlords as a major advantage in securing your buy-to-let mortgage for multi-unit properties. With a multi-unit property, you may have even carried out the renovations yourself, if the property was inherited or you bought an older property to renovate as an investment.

Student let

As you can imagine, this means that you have rented out the property specifically for the use of students. These will be in University cities and have multiple bedrooms with shared facilities such as kitchens and bathrooms.

You would expect a student let to be a larger property, and as with HMOs there may be special local authority licensing you need to consider, as well as specific rules you need to follow before you can use your buy-to-let property as a home for students.

Buy-to-let mortgage requirements

Eligibility criteria for a buy-to-let mortgage is more strict than with a residential mortgage. Below we look at the most common things a lender requires for accepting your buy-to-let mortgage application.

Age – You’ll need to be over 21 to be eligible for a buy-to-let mortgage. The age range usually lands between 21 – 75 for you to be seen as a good prospect.

Deposit – Most buy-to-let mortgages start at 75% LTV, meaning you will need a 25% deposit as a minimum, although the higher your deposit the better.

Income – Most lenders require a minimum income of around £25,000. This is usually more important if you are a first time landlord. Many lenders will base their assessment on the potential rental value of the property rather than on how much you earn.

Credit History – Lenders look at your borrowing history to ensure you are reliable. If you have a poor credit history, you should take steps to improve this before considering a buy-to-let mortgage.

How big does my deposit need to be?

As with every mortgage, the higher your deposit, the better your buy-to-let mortgage rates will be. For a buy-to-let mortgage you’ll need a deposit of 20% as an absolute minimum. This varies from lender to lender and can be as much as 30% in some cases. Without a large deposit, you won’t have much of a chance to be accepted for a buy-to-let mortgage.

The reason for this increase in the deposit is because of the increased financial risk of owning a second home for the purposes of letting it out. Even though it is an excellent way to invest money, there is a financial risk attached if, for instance, you are unable to cultivate a regular stream of tenants whose rent will cover the costs of the mortgage and the upkeep of the building.

Things to consider before choosing a buy-to-let mortgage

You need to think about all aspects of buy-to-let before you decide to go for it. There are many things that could affect your future financial situation that are worth considering.

Rental income – You could encounter periods of time where you do not have any tenants in the building. If your property is unoccupied then the rent isn’t going to be paid. When these ‘void periods’ occur you’ll need some form of financial backup in place to make sure that the payments on the mortgage still take place.

Tax implications – This depends on the amount you are able to earn through rent but it will impact your income tax. These implications come into play for both your rental income and when you decide to sell the property. When you sell a property, you’ll need to pay capital gains tax on some of the profits you make from the sale. We cannot advise you directly about matters to do with tax but we can certainly point you in the right direction.

Term of the loan – Preparation is key. Plan out how long your initial loan term will be. Knowing how long it will last gives you plenty of time to plan what action you want to take when the term ends. If you face financial difficulty, or your financial situation changes you can decide whether to remortgage or sell the property far in advance, giving plenty of notice to your tenants and enabling you to make the transition with ease.

Rent is a taxable income

Before getting a buy-to-let mortgage we recommend getting tax advice on the property. This is because as a landlord you will be open to tax implications that differ from normal home ownership.

The fact is, rent is a taxable income. Working with one of our advisors, we’ll be able to give you all of the figures necessary to take to a property tax specialist to ensure that you fully understand all of the tax implications you will need to deal with personally when it comes to buy-to-let home ownership.

Our advisors are fully experienced in understanding the many elements of property and taxes. Although we are unable to advise you directly in this area, we can point you in the right direction and show you the areas to explore that will ensure your investment works for you, short term and long term.

Buy-to-let and let-to-buy

If you decide to rent out the property you are currently living in and move into a new property, then you are going to let-to-buy, rather than buy-to-let.

There are a few ways you can go about changing your mortgage to buy-to-let:

Consent-to-let – This is when you don’t need to release any capital from your current home for your next house purchase. In this case, you can ask your lender for ‘consent-to-let’. This is where they will change your current mortgage contract from residential to a let one.

Remortgage to a buy-to-let lender – The most common option for those wishing to let-to-buy. Remortgaging allows you to replace your current home mortgage and raise funds from your house to pay for the deposit and associated fees for the purchase of your new property.

You must never let your home with just your residential mortgage in place, convert your mortgage to buy-to-let to avoid problems with your lender. If you do this you could be in breach of contract with your lender, which will cause all manner of trouble for you!

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