If you're a landlord, chances are you're going to need a buy-to-let mortgage. But just what are buy-to-let mortgages, and how can you make sure you find the best deal? Well, our best rate tables provide an overview of the top buy-to-let rates available, or you can use compare Buy-to-Let mortgages to find those deals that meet your individual needs, simply by inputting a few details and then going through your personalised list of results.
However, let's start with the basics: read on for an explanation of everything you need to know about this specialist sector of the mortgage market.
A buy-to-let mortgage is a loan that's specifically designed for landlords who rent out a property. In essence, it's similar to a residential mortgage, in that you'll need a good credit rating together with a suitable deposit, but you're getting the mortgage on the assumption that you're not going to be living in the property yourself.
You won't be able to take out a standard residential mortgage if you're buying a property with the sole intention of renting it out, and even if you're an accidental landlord (for example, if you became a landlord simply because you were unable to sell your home after moving in with your partner, etc.), you'll need a suitable loan. In the case of the latter, some mortgage lenders may allow you to swap your residential mortgage to a buy-to-let arrangement, but generally speaking, you'll need a specialist product from the outset.
There are a few key differences you'll need to be aware of between residential mortgages and mortgages for buy-to-let:
As with all mortgage dealings, finding the right option all comes down to performing a thorough buy-to-let mortgage comparison. This means you'll need to take everything mentioned above into account, from the deposit you have and the resulting loan-to-value (LTV) you're looking for, to the rental income requirements, fees and age restrictions. The best buy-to-let rates you can find will of course be a huge driver of your decision, but make sure to not be swayed by rate alone – as discussed above, the benefits of a lower rate may be outweighed by a large fee, so you'll need to do your sums.
You'll want to look at the additional features of a buy-to-let mortgage, too, such as the incentives offered, early repayment charges and whether there's the facility to make over payments (or similar). These incentives and additional flexibility can often be appealing, but again, make sure it works out as the best value option in the long run.
Start the process by using our comparison chart to get an idea of the best buy-to-let mortgages available. For a more personal comparison use the filters to select the elements which are important to you on our buy-to-let mortgage calculator. This allows you to search for deals based on criteria such as the value of your property, the amount of loan required, your preferred mortgage term and whether you’re looking for a fixed or variable rate, presenting you with suitable options accordingly.
Property has long been thought of as a decent investment, particularly when compared to saving in cash, and it can even give stock market investment a run for its money. This view has been fuelled by continued house price rises in recent years, which have seen the value of bricks and mortar significantly enhanced.
It's an investment for the long-term, and but when you consider the fact that returns on cash savings are extremely low once inflation is taken into account, it's easy to see why it's so popular. For many, bricks and mortar is far more secure than investing in the stock market, too, as there's less volatility and you’ve got a tangible asset in your portfolio.
However, it's important to remember that, like any investment, returns from buy-to-let aren't guaranteed. There's a slim but ever-present chance that your property could go down in value, not to mention the fact that if you don't enjoy 100% tenancy, your profits could be compromised as you'd need to make the mortgage repayments out of your own pocket.
Then there are the various insurance payments and additional costs you need to consider, and that's before we get to the tax changes that have impacted the buy-to-let market of late, all of which are making it more difficult for all but unmortgaged landlords to make a profit.
The buy-to-let industry has been subject to a range of new taxes designed to dampen the market for the benefit of homeowners.
As a result, the profitability of buy-to-let arrangements has been compromised, and many landlords are questioning the affordability of remaining in the sector. It also means that many are considering becoming a limited company to avoid these higher costs Landlords who are structured as such will face a flat rate of corporation tax, which for some could prove beneficial.
The higher costs impacting the sector also means it's even more important to find the best buy-to-let deals possible. Use our independent charts to compare buy-to-let mortgages (or buy-to-let remortgages, depending on your circumstances), and make sure to consider everything from its rate to any extra fees involved. That way, you can be sure that you're not only getting the best buy-to-let mortgage rates, but that its true cost will mean you can buy properties with confidence.
Our preferred broker has a team of friendly and experienced mortgage advisers who are on-hand to help with your decision; simply request a call-back and someone will be in touch shortly. Our mortgage advice service is available if you need to borrow from £50,000 up to 80% of your property's value.
Mortgage advice can be particularly important in the context of buy-to-let, and even more so if you're considering setting up as a limited company. An experienced adviser will have the market knowledge needed to decide the best course of action and help you find the most suitable buy-to-let mortgage, taking your individual requirements into account.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.