If you are buying a second property for the purposes of securing a rental income then you need to apply for a different type of mortgage. This mortgage is known as Buy to Let and it is a legal requirement should you be renting the property out to tenants.
The vast majority of buy-to-let mortgages are provided on an interest-only basis. This means that, for each month of the mortgage term, you’ll only pay the interest on the loan, and none of the capital. This is how most landlords prefer to repay their loan although it doesn’t necessarily always stand. It is still possible to get a repayment loan with a buy to let deal.
Interest only can be good news in the short term as you’ll be able to keep your monthly outgoings low, but you should have a plan to either pay off the full loan or re-finance at the end of your term.
Investment property mortgage deals usually require you to stump up at least 20-25% of the value of the home. Before the pandemic hit, some buy-to-let mortgages were available with a 15% deposit. These seem to have all but disappeared now though. That’s not to say that they won’t return at some point in the future.
You can use a mortgage comparison calculator to compare buy-to-let deals online. Interest rates on BTL are generally a little higher than home buyer deals but they have been steadily falling over the years.
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The Mortgage Brain is a trading style of Elmco Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). Our Financial Services Registration number is: 445887. ©The Mortgage Brain 2013 – Registered in England No 04821075, HATS Gloucester Ltd, 162 Hucclecote Road, Hucclecote, Gloucester, GL3 3SH.
We do not charge a fee for a mortgage consultation. There may be a fee for arranging your mortgage. The precise amount depends on your circumstances. However, it will be no more than £495 or 1% of the advance-whichever is greater. Your home may be repossessed if you do not keep up repayments on your mortgage The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. www.fca.org.uk
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