If you want to buy a property to rent out rather than live in, a buy to let mortgage (BTL) could help you get there. But how does a buy to let mortgage work exactly? In this helpful guide, we talk you through what they are, what they mean for you and how you can apply with us.
What is a buy to let mortgage?
Buy to let mortgages are designed to help you buy a property, just like an ordinary mortgage, but with some key differences.
For example, with a BTL mortgage, you rent out a property to tenants which creates monthly income (so you can repay the mortgage). The amount you can borrow with a buy to let mortgage will usually depend on how much rent you’re likely to expect from the property.
A buy to let mortgage is like a residential one, you still buy a property. The difference is that you’re buying a property to rent out to others instead of living in it yourself.
How do I repay my mortgage?
Interest only mortgages - these allow you to pay only the interest each month, with the full loan amount due at the end of the mortgage term
Repayment mortgages - these allow you to make monthly repayments towards the interest and the amount borrowed, and the loan will be paid off by the end of the term as long as you keep up with repayments
Part and part mortgages - these are when you split your mortgage repayments to part interest only and part repayment
Portfolio landlords
If you have four or more mortgaged buy to let properties, we will class you as a portfolio landlord. So, a specialist underwriter will need to review your application.
We allow portfolio landlords with a minimum of four and no more than ten mortgaged BTLs. Other lenders will have different criteria, with some taking larger portfolios.
Portfolio landlords will need to apply through a broker for a mortgage with us.
Temporary letting
If you've got a residential mortgage but need to let the property for a short period of time, you'll need to contact your lender to get Consent to let. Depending on how long you want to let out your home, you may need to switch to a buy to let mortgage.
Can I rent out a room and still have a residential mortgage?
When searching for a property, it’s important to be clear about both the type of property you want and where it’s located.
Keep an eye on house prices in your chosen area, as well as the average rental costs - this will give you a good sense of demand and local market conditions.
It’s also worth getting to know the area by looking at things like:
The type of tenants the area attracts (students, families, professionals)
The area’s reputation
Transport links
Shops, facilities, schools
Any large scale developments that could impact property prices
Property values
All of these factors will influence the kind of property you choose to buy. You should also think about whether any work is needed before renting it out, if there are service charges or ground rents to pay and how energy efficient the property is.
How to apply for a buy to let mortgage with us
Whether you're an experienced landlord or it's your first buy to let property, Leeds Building Society has a range of buy to let mortgages available. As well as helping you purchase a buy to let property, we're also here if you'd like to remortgage from another lender.
We do not provide advice for our buy to let mortgages. If you’d like advice on what buy to let mortgage to choose you can apply through a broker. You also cannot apply online for a buy to let mortgage with us.
Applying through us
These are some mortgages you can apply for directly through us.
HMO mortgage products offer you even more lending options in the Buy to Let market.
If you have any questions, you can call us on 03450 505 062 or book a non-advised appointment with our buy to let specialists.
Applying through a broker
You can apply through a broker for any of our general buy to let mortgages, but for our more specialised mortgages, you can only apply using a broker. The broker-only mortgages are:
Limited Company Buy to Let Mortgages
These mortgages are for taking a mortgage on a property through a limited company, rather than in your own name.
Portfolio Buy to Let Mortgages
These are mortgages for borrowers who have four or more distinct mortgaged rental properties in the UK.
You’ll need to find your own mortgage broker. If you’re not sure where to start, unbiased.co.uk offers a free service to help you find an FCA-regulated expert.
Your rental property could be repossessed or a receiver of rent appointed, if you don’t keep up your mortgage repayments.
Tips for landlords
As a landlord, it’s your responsibility to ensure your rental property is safe and free from hazards. This includes keeping all safety documentation up to date, especially those relating to gas and electrical equipment. Along with this, you should also ensure you have an up to date Energy Performance Certificate (EPC).
Before agreeing to a tenancy, make sure your tenants have provided the necessary documentation and, where applicable, references. Some landlords prefer to meet their tenants in person - this is entirely your choice.
Once you have chosen your tenants, ensure that all parties are happy with the tenancy agreement. This should clearly set out the rental term, costs and any arrangements for rent reviews or property inspections. Finally, protect your tenants’ deposit through a government-approved scheme.
Regulations for buy to let mortgages depend on the property or type of landlord you are.
If the main purpose of the property is to make profit from the rental income it is treated as commercial borrowing and is not regulated by the FCA
If more than 40% of the property is occupied by the owner (or immediate family) then this is treated as a residential mortgage and is regulated
Consumer buy to lets are also regulated. These usually apply to 'accidental landlords' such as people who have inherited a property and decide to rent it out
Typically, a buy to let mortgage will require a larger deposit and charge a higher rate of interest when compared to a normal residential mortgage. As with any loan, it depends very much on your personal circumstances, including things like your credit record and any existing debts you may have.
The amount you can borrow with a buy to let mortgage depends on how much you expect the property to earn in rent. A measure called Interest Coverage Ratio is used to make sure your rental income is enough to cover the total cost of your mortgage, associated costs and void periods.
With buy to let, you're purchasing a property to rent out to others. Let to buy means moving out of your current home so you can rent it out and buy somewhere else to live.
The interest rate on a buy to let mortgage will depend on the lender and type of product you choose. To make things easier, you can view our range of Buy to Let mortgages.
This guide is not advice and you should seek independent financial or legal advice if needed.
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