How much does a Buy to Let property cost?

It’s hard to put an exact figure on it. We assess everybody’s case and property on an individual basis. What you do tend to find is that product fees for Buy to Let products tend to be slightly more expensive than residential – usually in the region of £999 to 1% of the mortgage amount, particularly for the limited company deals.

You’ve also got to pay stamp duty because it is a second home and an investment property. That means you have to pay an additional 3% on top of the residential tax. You will also have broker fees, and you might decide to get a home buyer’s report done on the property instead of the standard valuation.

So we can’t put an exact figure on the cost without looking at the details of the property and whether you are buying as an individual or a company.

Is it illegal to rent out a house without a Buy to Let mortgage, or to live in your own Buy to Let property?

If you buy a property specifically to rent out and you decide you want to live in it, you need to make the lender aware. They might not allow that, and ask you to remortgage over to a residential mortgage.

If you own a residential house and decide to rent it out, they can be a lot more flexible. You do need to make sure you tell them upfront. You can get something called Consent to Let, where the lender gives you permission to rent the property out for the rest of the fixed term. When the fixed term is over, if you are still renting it out, you would need to turn it into a Buy to Let mortgage at that point.

Should I choose interest-only or repayment on a Buy to Let mortgage?

Both have their pros and cons. Speaking to a mortgage broker is important. Depending on what your goals are and what you plan to do in the long run, we can decide which would be the most suitable option for you.

If you’re looking specifically for a cash flow property to generate a bit of extra income then interest only could be the best route. It gives you more flexibility – some people like to make overpayments, but if you’re not making any profit it’s harder to do that. You might choose to wait until the end of the year, see how much money you’ve made and then make an overpayment on the mortgage.

If you go down the repayment route, you are tied into paying it back month in, month out, even if you aren’t making a profit from the property. If you are specifically investing for cash flow, interest only will give you a much greater return. Plus, if you have to start paying the mortgage yourself because you have no tenant or they aren’t paying, it’s a lot easier to cover interest only payments than the repayment option, which will be a higher amount.

How many Buy to Let properties can I own?

This depends on the lender. There is no real maximum, but once you own four properties or more, some lenders will see you as a bit more risky and limit their lending. With four properties you may need to look at lenders that specialise in portfolio landlord products.

When you’re looking at Buy to Let, at growing a portfolio of properties with long-term goals and plans, if you go to your Bank your options will be very limited. It’s likely you would only be able to get up to four properties – and then you’re on your own.

By speaking to a broker about what you plan to achieve from your property investment journey, we can put a full strategy in place. We will look at what lenders can lend on certain properties and explore other locations to invest in, especially if you’re specifically looking for cashflow properties.

The Financial Conduct Authority does not regulate some Buy to Let Mortgages.

Approved by the Openwork Partnership on 25/01/2023