If you are planning to buy a property in Guildford to let it out and collect rent, you will need a buy-to-let mortgage. There are some differences between buy-to-let mortgages and residential mortgages and it’s important to understand them when you’re calculating the financial viability of your new venture. In this blog, we look at mortgages for landlords and why it’s important to have the right financial product for your needs. 

What is a buy-to-let mortgage?

A buy-to-let (BTL) mortgage is the mortgage that landlords need when they are buying a property with a view to letting it. The rent the landlord collects is used to make the monthly mortgage repayments. Typically, BTL mortgages are “interest-only” which means that the monthly repayments only cover the interest on the mortgage. The amount you borrowed initially is paid back at the end of the mortgage term.

BTL mortgages are usually more expensive than residential or homeowner mortgages. This is because landlords are seen as a higher risk than homeowners. Homeowners’ incomes tend to be quite steady (this is usually a condition of the mortgage) but landlords may experience periods when your property stands empty, or when repairs are needed and you don’t turn a profit. Reflecting this risk, most lenders will ask for a larger deposit when you’re buying to let. The fees can also be higher. 

Can I just take out a residential mortgage instead?

Unfortunately not. Remember that any property with a mortgage on it the owner has a responsibility to make the lender aware of any changes to the terms of their agreement as the lender usually has first charge over the property and need to approve these changes. If you rent out property and you don’t have the lender’s approval, you could face severe penalties. For example, the lender could change your residential mortgage to a BTL mortgage at the most expensive rate, or revoke your mortgage altogether. 

Letting a property with a residential mortgage could also invalidate your landlord insurance.

I want to let the property I currently live in – do I need to change to a buy-to-let mortgage?

Not necessarily. The first step is to tell your lender what you intend to do. In some cases, they may allow you to keep your existing mortgage but pay a one-off fee to represent the change in circumstances. In other cases, the lender may require you to change to a buy-to-let mortgage.  

The most important thing is that you tell your lender that you are planning to let your property. This keeps everything above board and saves you from nasty surprises further down the line. 

If you have questions about any aspect of your mortgage, or if you’re not sure whether you have the right mortgage for your rental property, talk to your lender. If you are looking at a new mortgage, we can recommend a mortgage broker base in Guildford with a fantastic reputation to get you on your way. Just ask a member of the Cobbles team for their details.

Let property in Guildford

And if you have your buy-to-let mortgage in place and it’s time to rent out your Guildford property, talk to us! The Cobbles team are highly experienced at letting property – get in touch today on 01483 457 000 to find out more.