ESPC Jargon Buster: Buy-to-Let Mortgages

In our Jargon Buster series, we break down the terminology of the property industry to help you feel confident and in control of your home-buying journey.

You can read the previous Jargon Buster features here.

In this article, we’re discussing the term ‘Buy to Let Mortgage’, and what it means when buying a property to rent out in Scotland.

What is a buy to let mortgage?

A buy-to-let mortgage is a mortgage product specifically designed for those who intend to rent out a property they are purchasing, whether that is as a short-term or holiday let, or as a long-term let with fixed tenants.

Do I need a buy to let mortgage?

If you are intending to rent out the property you are getting a mortgage on, you will need a specific buy-to-let mortgage – unless you are paying for the property in cash, in full. If you need a mortgage, then you must be entirely honest with the lender as to what your intentions are for the property.

Can I rent out my home without a buy-to-let mortgage?

It is legal to rent a property with no buy-to-let mortgage, but only if you own the property outright already or are a cash purchaser.

There are certain situations when a homeowner with a residential mortgage may find that they wish to rent out their domestic property for a period after they have lived in it. Under some circumstances, lenders may consider giving a ‘Consent to Let’ or ‘Permission to Let’ after a period, rather than applying for a buy-to-let mortgage – you can find out more about renting without a buy-to-let mortgage here.

How do I get a buy to let mortgage?

Like with a residential mortgage, you will need to apply for a buy-to-let mortgage. Many high street lenders offer specific buy-to-let mortgages – a reliable independent mortgage broker can help you to source the best fit for your individual circumstances.

Speak to ESPC Mortgages about sourcing a buy-to-let mortgage.

What’s different about a buy to let mortgage?

A buy-to-let mortgage can be taken on a repayment basis (like a residential mortgage), but most buy-to-let mortgages are interest-only. This means that you only pay off the interest rather than the capital each month, leading to low monthly repayments. However, the entire mortgage balance will need to be paid off at the end of the mortgage term, which can be done by selling the property, remortgaging the property or using existing savings.

How much can I borrow with a buy to let mortgage?

Lenders usually base how much you can borrow by how much rent you will charge, rather than your current salary. This requires planning and research to make sure your rental income will cover your mortgage repayments and any additional expenses, such as insurance and building management fees. The expert team at ESPC Lettings can advise you on this, as well as the independent mortgage brokers at ESPC Mortgages.

Find out more

If you’re interested in finding out more about buy-to-let mortgages, contact ESPC Mortgages for help and advice.

If you want to know more about the process of investing in buy-to-let property and lettings in Edinburgh, the expert team at ESPC Lettings can help.