Please note: borrowing money costs money.
Buy-to-let mortgage
Buy-to-let means buying a home to rent out. A buy-to-let mortgage finances that use under the lender's terms. The property, rental income, own funds and risks require a different assessment from a mortgage for your own home.
Responsible for the content: Ricardo Roso. Updated on .
How does it differ from an ordinary residential mortgage?
With an owner-occupied mortgage, you live in the property yourself. A buy-to-let mortgage is intended for the letting use permitted by the lender. Consider the property, tenants and type of letting in advance. Permanent letting to one household, letting individual rooms and holiday letting are different situations. Permission for one type says nothing about another.
Want to rent out your current home? Check your mortgage terms first and obtain your lender's permission if required. Letting without the required permission can have serious consequences. A letting plan does not automatically allow an existing loan to continue unchanged.
How are the loan amount and your own funds assessed?
A lender considers the property and your financial circumstances. The market value with tenants in place may be an important starting point. This value is not necessarily the same as the purchase price or the value with vacant possession. Rental income, your own housing costs and other commitments may also count.
Expect to contribute your own funds and keep purchase costs and reserves clearly identified. The own funds required depend on the price, the property valuation used, your circumstances and the lender's terms. There is no universal percentage applying to every rental property or provider. A favourable valuation does not mean an application will automatically be accepted either.
From gross rent to a realistic budget
The rent received is not the same as the amount you keep. Deduct financing payments and property costs from income. Also include irregular expenses, such as major maintenance. Then consider what happens if a tenant pays late, the property is temporarily empty or interest rates rise after the fixed-rate period.
Record how much reserve you will keep available and how you can cover setbacks from other income or assets. Do not treat a possible rise in property value as a certainty in your budget. Sale proceeds may disappoint and leave an outstanding debt.
- Maintenance, repairs and any energy improvements.
- Insurance, taxes and any owners' association contributions.
- Management, administration and the costs of finding tenants.
- Vacancy, payment difficulties and changes in interest rates or property value.
Check tenancy rules and permission for the property
A financing offer does not determine the rent you may legally charge or how you may end a tenancy. Check the property valuation points system, rent rules, tenant protections and tenancy agreement requirements. Do not assume you can freely set the rent or require a tenant to leave whenever you wish.
Ask the municipality which rules and any permits apply to the address. For a flat, also check the owners' association rules and agree the letting use with the insurer. Have the legal and tax consequences assessed for your ownership circumstances. Treatment may differ between owner occupation, temporary letting and an investment property.
Plan for repayment and a future sale too
Discuss how the debt reduces during the term and what amount is due at maturity. Also consider the terms for overpayments, changes and selling. An interest-only part does not remove the repayment obligation. Future refinancing or sufficient sale proceeds are not guaranteed.
Using equity from your own home can increase your total debt and monthly payments. Your own home and the rental property should then be assessed together. Looking only at expected rent does not give a complete picture of affordability.
Considering using equity from your own home? Read our explanation of accessing home equity.
Also read what an interest-only mortgage means for the debt due at maturity. Terms for letting may differ.
Discuss your letting plans with RFD
From Sittard, RFD discusses buy-to-let mortgage questions with clients across the area from Echt-Susteren to Maastricht. Bring the main details to an introductory meeting: the property, purchase or existing loan, letting use, expected rent and your available funds. The first introductory meeting is free. We agree the support, information and costs for the next stage.
The mortgage calculator on this website provides an estimate for an owner-occupied home. It cannot establish how much you can borrow for a buy-to-let property. A buy-to-let mortgage requires a separate calculation and assessment.
Want to discuss your plan? Book an appointment with RFD and then share confidential documents through the secure method agreed with us.
Frequently asked questions
What is a buy-to-let mortgage?
Finance for a home you buy or retain to rent out. The permitted type of letting, financial assessment and terms are determined for each lender and application.
How much of my own money do I need for a buy-to-let mortgage?
That depends on the purchase price, the valuation used by the lender and the permitted loan amount. There are also purchase costs, and you need a reserve for maintenance and lower-than-expected rent. No fixed percentage can be given for all circumstances.
Can I use RFD's maximum mortgage calculator for this?
No. That calculator provides an estimate for an owner-occupied home. A buy-to-let mortgage requires a separate calculation taking account of factors including the property, letting arrangements, your funds and the lender's terms.
This is general information, not personal mortgage advice or a finance offer. Your options and the tax implications depend on your circumstances and the provider's terms. Read the disclaimer.
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Sources for this guide
General information from RFD. Sources consulted on . Rules and terms may change.
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