BTL or Residential?
Most major banks and lenders view buy-to-let mortgages and conventional residential mortgages as entirely different products. This is because while one is issued to enable the borrower to purchase a home to live in, the other supports a commercial venture for generating profits.
In addition, the fact that the applicant will subsequently be responsible for two mortgages at the same time brings additional scrutiny into the equation.
Qualifying for a buy-to-let mortgage follows most of the same basic principles as a residential mortgage, though with slightly stricter criteria to fulfill. Traditional lenders typically require a down payment of 25% to 30%, while imposing slightly elevated interest rates and overall borrowing costs.
You may also need to provide evidence that the projected monthly rent income on the property you buy will be at least 25% higher than the corresponding mortgage payment.
Interest Only Buy-to-Let Mortgages
It is also interesting to note that most buy-to-let mortgages on the High Street are issued as interest only mortgages. This means that your monthly mortgage repayments will only cover the interest on your mortgage, after which you will still be liable for the remaining balance.
At the end of the loan term, the full balance owed (the total price of the property) will need to be paid. This can be done by taking out another mortgage, by selling the property or by raising funds through any other viable means. Some buy-to-let mortgages are more conventional in their nature, but most are issued as interest only mortgages on the High Street.
Irrespective of your preferences, your priorities and your budget, there may be alternative options available that are worth considering. Along with buy-to-let mortgages, independent lenders away from the UK High Street offer a wide variety of specialist secured loans, bridging loans and tailored funding options for all types of property investments.
Rather than taking your business directly to one specific lender, it is advisable to consult with an independent broker ahead of time. This will help you make sense of the available options, before submitting your application to a suitable lender and ensuring you get an unbeatable deal.