How Does a BTL Mortgage Work?

If you are thinking of investing in property to let or already have rental properties and wish to expand your portfolio, you will need to take out a BTL mortgage if you want to finance it. In many ways they are similar to a mortgage for a property you intend to live in, but there are key differences. Here we will look at how a buy-to-let mortgage works.

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Who Can Get a BTL Mortgage?

These mortgages can be taken out if you want to invest in residential property. You need to be able to afford to take a risk. You cannot rely on the rental income to pay off the mortgage each month because there will be void periods. There may also be other situations which prevent you from renting out the property. So you need to have the finances behind you to pay the mortgage at all times. You’ll also need a good credit record and not have too many other debts.

How Do They Work?

There are some key differences between BTL mortgages and ordinary ones. The fees and interest rates tend to be higher. The minimum deposit could be 25% of the property value, and many are interest-only mortgages. You have to repay the capital in its entirety at the end of the mortgage or when you sell.

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How Much Can You Borrow?

Most lenders have a maximum age of 75 when the loan matures, although some will go up to 85 years. Many lenders also require the borrower to show an income of at least £25,000 a year on top of the income they make from rent.

If you decide to go ahead and invest in a buy-to-let property, you will need to manage it within the regulations and the law. This includes a lot of administrative work such as setting up contracts, vetting tenants, preparing inventories and obtaining gas safety certificates. The easiest way to keep on top of these duties is to use specialist software. For instance, Property Inventory Software is available from to enable you to keep a good and accurate record.

Buy-to-lets are a solid investment because house prices continue to rise and more people are renting rather than buying. You need to ensure you are investing in the right location and marketing your property at the right rent.