There are many differences. Landlords typically apply for interest-only buy to let mortgages to maximise their profit margin and cash flow. Whereas, residential mortgages are often taken on a repayment (capital and interest) basis to ensure that the mortgage is redeemed at the end of the overall term. The way buy to let and residential mortgages are calculated is also different. With buy to let mortgages, lenders will largely base affordability on the monthly rental assessment for the property. With residential mortgages, affordability will be based on many factors such as the applicant’s income, financial commitments, adverse credit position and loan term.
Mortgage lenders typically allow applicants to have a maximum of 10 Buy to Let mortgages in their portfolio but there are a few exceptions that allow more. This criteria may also be different if the Buy to Let mortgages are acquired through a Limited Company instead of on a personal basis.
This depends on whether the mortgage was acquired on a Repayment or Interest-Only basis. Repayment mortgages are cleared upon expiration of the overall mortgage term. Whereas, with an Interest-Only mortgage the capital balance will be payable at the end of the mortgage term. Most landlords acquire Buy to Let mortgages on an Interest-Only basis to maximise their short-term profit and cash flow. To be accepted for an Interest-Only Buy to Let mortgage, applicants must provide a Repayment Vehicle - such as Sale of Property, Redemption via Investment Funds, etc - to declare how the capital balance will be repaid.
Yes, this may be possible. If there is sufficient equity in the property (a minimum of 20%), a satisfactory rental assessment and if the property meets the lender’s criteria, you should be able to acquire a Buy to Let mortgage. Let to Buy is a common process to convert a Residential to Buy to Let mortgage.
If you use Boon Brokers for mortgage advice, you will not be charged a broker fee at any stage of the transaction. This is quite unusual in the broking industry - an average mortgage broker fee is between £300.00 - £500.00 according to the Money Helper Service. With Boon Brokers you will make a significant saving straight away. On top of a broker fee, Buy to Let mortgage lenders may charge a booking fee. This is likely to be between £999 - £2,000 depending on the selected mortgage product. Lastly, a valuation fee of up to £500 may be payable at application stage too.
Yes, interest rates are normally higher for Buy to Lets than Residential mortgage products at the same Loan-to-Value percentage. This is because of the heightened risk to the lender. Buy to Let mortgage lenders rely on a third-party, the tenant, to meet their monthly rental commitment as per the Tenancy Agreement. If they fail to make a payment to the landlord, there is a high risk of a mortgage default. As a Buy to Let mortgage lender does not vet tenants at any stage, they are relying on your judgement as the applicant to select suitable occupiers. Whereas, with Residential mortgage applications, the lender’s risk is lower as they only need to assess your ability to repay the loan and there are no third parties that may cause repayment issues.
Yes, a family member can live in a Buy to Let property as long as the mortgage is on a Consumer Buy to Let basis. If a family member resides in a property that has a Business Buy to Let mortgage (which represents most of Buy to Let mortgages in the market), this would be mortgage fraud.
Yes, Airbnb does technically count as a Buy to Let. However, there are very few mortgage lenders at this time that offer Buy to Let mortgages for Airbnb properties. This is because, for many lenders, the risk of rental voids is too high if the property is untenanted for a prolonged period.
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