Mortgages: getting in the buy-to-let sector

In recent years, there has been a rush of new lenders entering the buy-to-let market. There is now a lot of choice available, and careful selection is therefore important.

There are a few general rules to note: A buy-to-let mortgage will require a larger deposit, usually around 20% to 25% of the property’s value. In some cases, a 15% deposit is permitted – but lenders may charge a higher rate of interest as the risk is higher. In addition, the lender will want to know the property’s rental potential and landlords should therefore target a gross rent of around 135% of the property’s interest-only mortgage repayment. While some will allow a lower rental yield, you could again find such loans are more expensive.

Landlords have the choice of either interest-only, or repayment products. There are also some flexible mortgages that combine both. One advantage is these provide flexibility over the repayment schedule. However, such loans tcan come with higher interest rates and need to be carefully managed to get the most benefit.

From a lender's perspective, they will need to know the your salary details and about any other properties you own. Each lender will also have their own criteria which can affect the interest rate they charge. This can make a big difference to your final repayments, so it is best to speak to a financial adviser and ensure you have checked out all your options.

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