BTL mortgage

Misteek · 2 January 2021 at 11:33PM

I'm enquiring on behalf of my sibling who has never bought a house before.
She's looking to buy a property to let.
Can you please tell me, how does this differ from a residential mortgage?
Also what costs should be considered? ie. surveying solicitors. Are the interest rates considerably higher than a residential mortgage?
The idea is to use the income to pay off the mortgage. Is the rental income taxed at source? or how does that work?
Lastly does BTL be interest only or repayments mortgage?

K_S · 3 January 2021 at 12:19AM

Misteek said:

I'm enquiring on behalf of my sibling who has never bought a house before.
She's looking to buy a property to let.
Can you please tell me, how does this differ from a residential mortgage?
Also what costs should be considered? ie. surveying solicitors. Are the interest rates considerably higher than a residential mortgage?
The idea is to use the income to pay off the mortgage. Is the rental income taxed at source? or how does that work?
Lastly does BTL be interest only or repayments mortgage?

@misteek Very broad answers to your queries below that touch upon the mortgages aspect of it -

How it differs from resi - resi is to live in, BTL to let out. BTL mortgages need a higher deposit (typically at least 25%), affordability is usually based on the monthly rental (resi is based on personal income), resi mortgages are regulated and most BTL mortgages are not

Costs - yes, compared to resi mortgages, interest rates are a bit higher for BTL mortgages owned directly by the landlord and significantly higher if owned through a ltd. co.

BTL mortgages can be interest only or repayment, though (at least from my experience) the borrowers almost always take them out on an I/O basis.

As a first time landlord, the pool of lenders available to her will be slightly smaller but unlikely to be a show stopper on its own.