High Street – Buy-to-Let

Buy-to-let mortgages typically require a higher minimum deposit compared to residential mortgages.

While residential mortgages might require a minimum deposit of around 5-10%, buy-to-let mortgages often demand a deposit of at least 25%. This higher deposit helps mitigate risk to the lender, as investment properties carry higher risk due to potential fluctuations in income.

Lenders assess a borrower’s ability to service their mortgage using not only personal income but also estimated rental income from the subject property. The projected rental income should usually cover a certain percentage of the mortgage payments, often around 140%. This ensures that even during periods of vacancy or reduced rent, borrower’s remain able meet their mortgage obligations.

While rental income is a primary factor, lenders also consider a borrower’s personal income and financial stability. They want to ensure that mortgage payments continue to be serviced should the property become vacant for a sustained period.

Buy-to-let mortgages often come with higher interest rates when compared to residential mortgages. This reflects the commercial nature of owning investment property. Additionally, borrower’s should be aware of any associated fees, such as arrangement fees or early repayment charges. These costs can impact the overall financial viability of the investment.

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