27 June 2022 20:45

Difference between a mortgage and buy-to-let in UK

Buy-to-let mortgages are a lot like ordinary mortgages, but with some key differences. The fees tend to be much higher. Interest rates on buy-to-let mortgages are usually higher. The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%).

What is the difference between a normal mortgage and a buy-to-let mortgage?

Typical residential mortgages require repayments of both the loan and interest each month. However, with buy-to-let mortgages, most landlords choose an interest-only mortgage whereby landlords only pay the interest repayments, which is a considerably lower payment compared to those with residential mortgages.

Is a residential mortgage cheaper than a buy-to-let?

It’s usually cheaper to get a residential mortgage than a buy-to-let one – interest rates are typically lower, and so are the product fees because lenders see buy-to-let properties as higher risk. In addition to paying a larger deposit, the arrangement fees can be as high as 3.5% of the property’s value.

Is buy-to-let mortgage more expensive than residential?

More expensive — Buy-to-let mortgages are typically about one percentage point more expensive than residential mortgages. This is because banks view tenants as higher risk than owner-occupiers. High fees — Some buy-to-let mortgages also have high arrangement fees – as much as 3.5 per cent of the property value.

Is it easier to get a buy-to-let mortgage or residential?

It’s often easier to get a residential mortgage than a buy to let mortgage if you have adverse credit. The same lender may offer you a residential mortgage but not a buy to let mortgage.

Can I rent out my house without telling my mortgage lender UK?

If you are a homeowner, the terms of your mortgage may not allow you to rent out your home unless you obtain something called consent to let. Letting out a room without the permission of your lender is classed as mortgage fraud, even if you are in the process of switching to a buy to let mortgage.

Do you have to have 25% deposit for buy-to-let?

The minimum deposit for a buy-to-let mortgage is usually 25% of the property’s value (although it can vary between 20-40%). Most BTL mortgages are interest-only. This means you pay the interest each month, but not the capital amount.

Is buy-to-let worth it 2022?

So, is buy-to-let worth it in 2022? No investment is without risk but if you take a long-term view of it, buy-to-let can work for you. It’s not a get rich quick scheme but there is a good income to be made if you go in with your eyes open.

Can I rent out on a normal mortgage?

If you have a residential mortgage, it’s against the terms of your loan to rent it out without the lender’s permission. That amounts to mortgage fraud. The consequences can be serious. If your lender finds out it could demand that you repay the mortgage immediately or it’ll repossess the property.

What tax do I pay on buy-to-let?

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).

Can I live in my buy-to-let property UK?

While it isn’t illegal to move in to a property that you own with a buy-to-let mortgage, it is usually a condition of the mortgage that you let the property to tenants.

How much do you have to earn to get a buy-to-let mortgage?

Lenders will typically need the rental income to be at least 125% of the monthly mortgage payments (on an interest only basis), or even up to 145%, depending on a lender’s criteria. Most lenders will also require you to be earning an income yourself. Try the Buy to Let calculator to see how much you could borrow.

How much deposit do you need for a buy-to-let 2022?


Deposits for buy-to-lets tend to be bigger than a standard residential mortgage. Most lenders ask for a minimum of 20-25%, whereas some require up to 40%. Buy-to-let mortgages with smaller deposits are available, but the interest and fees will be considerably higher.

Can you have 2 residential mortgages in UK?

Technically, in the UK, you can have as many residential mortgages as you like, but lenders are wary of people using them to buy properties they then rent out. Therefore, lenders often only allow a maximum of 2 residential mortgages – one for your main residence and one for a holiday home or a family member to live in.

How do I avoid buy-to-let tax?


  1. Make use of little-known expenses.
  2. Offset losses made during coronavirus.
  3. Claim back for void periods.
  4. Turn it into a holiday home.
  5. Make the most of pension tax relief.
  6. Take on debt.

Can my son live in my buy-to-let property?

Pros and Cons of family buy to let
There are a number of benefits of operating a family buy to let: You can let to family members and charge them a reduced rent. You can live in the property if you need to. It may solve a problem for your family.

Can I buy my parents house and let them live in it rent free UK?

Can I Buy My Parents House And Let Them Live In It Rent Free? (UK And US)? You can buy your parents house and let them live in it, even for free. It is not illegal. But, you still need to declare your intentions during the purchase process, as this can have some tax implications.

Can I rent out a buy-to-let to a family member?

If you have a second home and you own it outright, you are free to use the property as you wish. However, if you have a mortgage on your second home and wish to rent it out to your son or daughter, a standard buy-to-let mortgage will not allow you to rent your property to a family member.

Can I buy a house and rent it to my parents?

The simplest way you can help your parents is by cosigning the mortgage, or signing your name alongside your parents’ on the mortgage documents, especially if they have low income. This wasn’t always the case, though, as it used to be uncommon for borrowers to need a cosigner.

Can I sell my house to my son and still live in it UK?

Selling your house to a child or family member for below market value can be perceived as a bit shady or underhanded. In fact it’s completely legal. In the UK there is no law that prevents you from selling your price at any price you want.

Can I buy a house and put it in my child’s name UK?

You can buy a property for your child to live in, with the intention that they will legally own it in the future. However, as it will be a second property owned by yourself, there will be tax implications.

Can I rent my house to my son UK?

Can I rent a property to a family member? You can choose to rent your property to a family member if you wish. However, you must have the right mortgage in place before you do, and you must follow all the rules on legally renting out property in the UK, including all legislation around tenant health and safety.

Do I have to pay tax if I rent to family?

You will still be liable for tax
If you let the property to a family member or friend and they pay you any rent at all, this must be declared. If the rent is higher than the costs, you may need to pay tax on the excess income.

Can 3 friends rent a house together UK?

Instead, you’ll be expected to let the house using the standard assured shorthold tenancy. That doesn’t mean that you can’t let the house to three different people, but it does mean that they should all be named as joint tenants on one tenancy agreement.