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Getting started with buy to let mortgages
There are a number of factors to consider when getting started with your buy to let mortgage journey:
- Who, or what, is applying for the mortgage? Will the mortgage be in your individual name, or for an SPV Limited Company, Trading Company, or another entity?
- What type of property are you purchasing or remortgaging?
- What are your plans for the property? This will determine the type and length of mortgage you need.
Below, we cover how these will impact your buy to let mortgage application process and answer some of the top buy to let mortgage FAQs.
Who, or what, is applying for the mortgage?
Firstly, will you be applying in your own name, or using an SPV (Special purchase Vehicle) Limited Company, Trading Company? There are benefits to each of these, so it’s important to fully understand which best suits you and your property investment needs.
BTL property types
Secondly, what type of property are you investing in? More complex property types may require a more specialist mortgage product. For example, not every buy to let mortgage can be used for HMOs or flats over commercial property. Speak to our experts about the type of property you want to mortgage and they’ll be able to help!
Your property investment plans
Finally, you need to consider what you’re looking for from your mortgage product. The ‘best’ rate available to you isn’t necessarily the cheapest, and understanding all the fees and associated costs is an important consideration. You may be looking for financial security over a long period of time; in which case, a five or ten-year fixed may be right for you. Or, you may be hoping to secure finance for a short term overall to meet your future plans. Perhaps the option to secure further advances (additional borrowing) in the future, or the security of knowing your recommended lender allows Product Transfers is a priority. Once you’ve made these decisions, your broker can then start to discuss the types of rates you could access. Don’t worry, your broker will give you expert advice on the types of rates on the market to help you achieve your property finance goals.
Find out more about your buy to let borrowing options…
Let’s find a buy to
Our easy-to-use buy to let mortgage calculator lets you find a mortgage rate and tells you how much your monthly repayments will be. All you have to do is give us a few details.
Your Buy to Let Property Types
The buy to let sector offers you a wide range of opportunities to diversify your property portfolio, as many different property types fall under the umbrella of buy to let. Whether you’re looking for a ‘vanilla’ investment or a more complex property, it’s important to understand how lenders will review your mortgage application, the type of experience they’re looking for, and to be aware of the types of rates and rental yields on offer for these properties. Here are some of the most popular sectors that we support landlords like you with:
• Vanilla BTL
• Multi-Unit Freehold Blocks (MUFBs)
• Holiday Lets
• Student Properties
• Portfolio loans
Frequently asked buy to let questions…
How are buy to let mortgages calculated?
While every mortgage lender will have their own criteria for determining how much you can borrow, they all look at the following key factors when calculating a buy to let mortgage:
- Loan to Value (LTV)
This is how much you are borrowing expressed as a percentage of the property value. Generally speaking, a lower LTV gives you access to more competitive mortgage interest rates and a higher LTV reduces the number of lenders available to you and usually increases the rates.
The majority of buy to let lenders cap their maximum loan amount to 75%. This means that even if you meet affordability criteria to borrow more, the most amount of funding you could access will still be up to 75% of the property value.
- Rental Income
Buy to let properties should be self-funding and your mortgage product should be affordable for your current circumstances. As such, the rental income should cover the mortgage interest repayments plus any additional costs associated with running the property.
When lenders are stress-testing your affordability, they will typically use a ICR of 145% at payrate (the mortgage rate) for individual borrowers and 125% for Limited Companies.
How can I compare buy to let mortgage offers?
There are three main factors to consider when comparing buy to let mortgage rates, and the headline interest rate isn’t one of them!
Lender criteria can vary significantly from provider to provider. While you may be a perfect applicant for one, another may not accept your circumstances at all. As such, working with one of our experienced brokers who has a thorough understanding of the buy to let market space can save you time and money, as they will only recommend lenders who they’re confident will accept your application and meet our standards of service.
The true cost of the mortgage is more than just the initial rate you source. You should always consider the arrangement and valuation fees, as well as the legal costs, alongside the interest rate pricing. We can help you compare the total cost of borrowing during the initial rate period of different mortgage products to ensure you secure the most competitive option.
Some products will have quirky additional terms, such as exit charges extending beyond the fixed rate period, which may catch you out once it’s too late. Ensure you carefully read over all the mortgage documents and speak to your broker to be confident in your mortgage application.
What is a buy to let mortgage?
A buy to let mortgage is a loan secured against a residential property that you intend to rent out to tenants.
What does a buy to let mortgage calculator do?
Our free buy to let mortgage calculator is a great tool for anyone looking to purchase or remortgage an investment property. With very little information from you, the calculator gives you a selection of buy to let mortgage interest rates that you could access. Just tell us:
- The property value and LTV
- How much you want to borrow, and for how long
- The property type
- Whether it’s a purchase or remortgage transaction
- The monthly rent
Then, you can start searching for your next deal.