If you're considering investing in a buy-to-let property in the UK, you're likely to need a buy-to-let mortgage. Before getting started with this journey it’s good to know the basics. Here we cover what buy-to-let mortgages are, the different types of mortgages, and which one would best fit your goals.
Buy-to-let (BTL) mortgages are a type of mortgage loan used to finance the purchase of a property that is intended to be rented out. In the UK, the demand for buy-to-let mortgages has been growing over the years as more investors are attracted to the opportunities of property investment.
Buy-to-let mortgages are typically interest-only. Interest-only buy-to-let mortgages are popular among investors as they allow them to pay only the interest on the loan, rather than the capital. This reduces the monthly payment, making it easier to manage the property's cash flow.
When it comes to buy-to-let mortgage lenders, there are countless options available in the UK: Santander, Barclays, The Mortgage Works, NatWest, and many more. There's some emerging 'specialist' lenders with flexible underwriting terms too: OakNorth Bank, Molo, Octopus Real Estate, Raw Mortgages, and Skipton International.
The most common type of buy-to-let mortgages, both for limited company and personal ownership, are 2-year fixed, 5-year fixed, and tracker rate mortgages. The benefits of getting a fixed or tracker interest rate will depend on the investor's financial situation and investment strategy.
A fixed-rate mortgage offers a fixed interest rate for a set period, they provide more certainty and stability. This mortgage is suitable for investors who want to manage their cash flow effectively and want to avoid interest rate fluctuations.
A tracker mortgage has an interest rate that is subject to change. Tracker products often track at a rate above the Bank of England base rate, meaning that when the BOE base rate moves, the payments move in line with this. There is more flexibility offered with a variable mortgage rate. Tracker rate mortgages are ideal for investors who are comfortable with taking on more risk and want to benefit from potential interest rate decreases.
Overall, buy-to-let mortgages are an excellent option for property investors who want to build a portfolio of rental properties. By choosing the right type of mortgage and lender, most investors can maximise their returns and achieve their investment goals.
Our experts can help you choose the right mortgage for your needs. With GG Mortgage we can also give you access to a panel of lenders and service you through the whole process. Book in a call with our team to get started.