Buy to Let Mortgage FAQs

Do I have to have a deposit for a buy to let mortgage?

Yes. A 15-20% deposit is required on a buy to let scheme. 25% will open up more options with lenders but, it is worth remembering that a 15% deposit is also perfectly acceptable and will allow you to establish a property portfolio quicker and tie-up less of your capital.

How do the interest rates compare to residential mortgages?

Buy to let interest rates tend to be marginally higher than residential mortgages due to the perception that this type of loan is less secure. Because the property will not be a roof over your head, lenders set higher interest rates to counter balance this perceived increased risk.

Are there any special conditions?

Generally, lenders will expect landlords to use an ARLA member to let and manage the property and for rental agreements to be drawn up as Assured Short hold Tenancies or other contracts as appropriate.

Can a Buy to Let investment be protected?

Insurance cover is now available for rental protection, in the event of a defaulting tenant, and for legal expenses in addition to the normal building and contents insurance.

What other costs should be taken into account?

Letting agent's commission and management fees, Insurance (Building/Contents/Rental and Legal Expenses Cover), the costs of keeping the property in a marketable condition, service charges and ground rents - if a leasehold. (The tenant is responsible for such items as utility accounts, Council Tax and TV licence fee etc.)

Tax and allowances

Deductions against tax on rents received may be claimed for the costs of maintenance and repairs, insurance, cleaning, gardening, agent's commission and other reasonable management expenses (but not improvements). If you come to sell an investment property then you will have assessed for capital gains tax. You may need to seek professional help with this.

The initial cost of furniture fittings and fixtures is not allowable, but the actual cost of subsequent replacement may be claimed; or, alternatively, a wear and tear allowance of 10% of the rents received may be deductible.