How does a buy to let mortgage differ from a regular mortgage?
Put simply, business buy to let mortgages are for properties you purchase with the intention of renting them out to a third party. Consumer buy to let mortgages are for ‘accidental landlords’. Both types of buy to let mortgages differ from traditional mortgages in that:
Interest rates are 1-2% higher:
This is because Lenders view a property that you are not going to personally live in as a greater risk. Tenants do not have the same incentives as an owner occupier to look after the property and there may be times when the rental income does not cover the mortgage payments.
The minimum deposit is 15% of loan value:
While for a residential mortgage it is possible to pay as little as 5% deposit, Lenders like you to have a larger personal stake in a buy to let property as it reduces their risk whilst also giving them more chance of recouping their debt should they have to repossess the property.