You cannot live in the property yourself if you have a buy-to-let mortgage, so if this is your aim you should get a standard residential mortgage instead. There are some basic differences between a standard mortgage and a buy-to-let mortgage that can potentially make getting a buy-to-let mortgage more challenging.

Mortgage lenders tend to view buy-to-let mortgages as having a higher risk than standard residential mortgages. This is because landlords can sometimes experience problems with collecting rents, and vacant periods where there is no tenant in place and hence no rental income.

Due to the higher risk involved for lenders, landlords are usually required to pay a larger deposit for a buy-to-let mortgage. The minimum deposit required is usually around 25% (of the property value), although this does vary between lenders and precise type of mortgage. There have been some deals available with a 20% mortgage, but with higher rates. The best buy-to-let mortgage deals tend to require a higher deposit which can be as high as 40%. Arrangement fees also tend to be higher than those applied to standard residential mortgages.

The majority of buy-to-let mortgages are interest only as opposed to capital and interest mortgages which tend to predominant with standard mortgages. So landlords only tend to service the loan by paying only the interest and not making any capital repayments. This usually means that the monthly payments are lower, however, the mortgage remains outstanding at the end of its period. Landlords will then either re-finance the mortgage, sell the property to repay the loan and take profit from the increased value, or pay off the mortgage with accrued savings they’ve made over time.

The amount you are able to borrow on a buy-to-let mortgage will depend on how much rent you can receive from your tenants. Lenders usually require you to receive at least 125% of your monthly mortgage interest payments, but many can require up to 140%

It is fairly straightforward to estimate how much rent you can achieve from your property by looking at similar properties in the area. However, a lender will normally require verification of the rental value from a professional surveyor. The corollary is that the more you charge in rent, the more you can borrow.

Just like standard mortgages, a buy-to-let mortgage has a loan-to-value (LTV) ratio. This is calculated by the size of your mortgage as a percentage of the property’s value. For example, if your property is valued at £150,000 and your mortgage is £120,000, then your LTV will be 80%.

Before applying for a buy-to-let mortgage there are certain that, as a borrower you must meet so as to be eligible ...

First you need to already own a home yourself, with or without a residential mortgage. The lender will then assess your financial circumstances in much the same as they do for standard residential mortgages. It will be easier for you to obtain a good deal if you have a healthy credit rating and don’t have large debts such as credit cards, or other loans. A lender will also assess your income, with many requiring a landlord to have an annual income of at least £25,000.

The majority of lenders also set upper age limits, usually 70-75 years old (at the end of the mortgage term). Because most mortgages tend to be 25 years, you would normally have to be around 45-50 years old, or younger. There are some lenders that have higher age limits, sometimes as high as 90 years old..

When your interest-only mortgage comes to the end of its term you will need to pay off the outstanding capital element. Mostly this is achieved by selling the property, the point at which landlords make the majority of their profit. However, in some situations, particularly if the value of the property has fallen then a loss can be incurred.

There is a vast array of providers, each with a choice of different mortgage types. Sorting through these to find the best deal can be arduous and sometimes confusing ...

Our advisers are plugged into all the latest deals from every lender in the market. With some very basic information, we can match you to the best deal available for your circumstances very quickly, and usually obtain an indicative offer in a few minutes.

By using a specialist broker / adviser like ourselves you are assured of obtaining the best deal available in the market at the current time.

Yes, the income you receive as rent is taxable ...

You need to declare any rent you receive as part of your Self Assessment tax return. The tax on your income is then charged in accordance with your income tax banding (20% for basic rate taxpayers, 40% for higher rate, and 45% for additional rate).

You should be aiming to achieve a rental yield of around 7%, or more.