If you are buying a property to let out in Scotland, you will need a buy-to-let mortgage as opposed to a residential mortgage which is only for those living in the property.
Do I need a buy-to-let mortgage?
If you plan to rent out the property you are seeking a mortgage for, you will need a bespoke buy-to-let mortgage, unless you plan to pay the full price of the home in cash.
Is it illegal to rent out a property without a buy-to-let mortgage?
It is legal to rent a property with no buy-to-let mortgage, but only if you are a cash buyer or already own the property outright.
In some circumstances, lenders may be willing to give homeowners a ‘Consent to Let’ or ‘Permission to Let’ agreement rather than applying for a buy-to-let mortgage if they want to let their domestic property for a period of time after they have lived in it.
There is usually a maximum time period that it’s possible to apply for a Consent to Let for – generally ranging between 6-24 months.
How do you apply for a buy-to-let mortgage?
The application process for buy-to-let mortgages is similar to residential mortgages. Lots of high street lenders offer specific buy-to-let mortgages and an independent mortgage adviser can help you find the best deal.
How is a buy-to-let mortgage different to a standard one?
A buy-to-let mortgage is fairly similar to a residential one with a few differences.
Most buy-to-let mortgages are interest only which means that you only pay off the interest each month, not the loan itself. This means your monthly repayments will be low, but you will need to pay off the entire balance at the end of the mortgage term which can require the sale of the property, remortgaging or using existing savings.
Lenders generally believe there is more risk involved in buy-to-let mortgages, meaning these type of mortgages often come with higher interest rates. Buy-to-let mortgages also usually require a higher deposit of around 20-25% and require you to have been paying an existing mortgage for 12 months or more.
Can you change a buy-to-let mortgage to a residential one?
This will depend on the terms of your mortgage. If your existing mortgage cannot be changed, you may need to switch to a different product which could mean paying additional fees.
How much can you borrow with a buy-to-let mortgage?
Lenders generally base how much you can borrow by how much rent you will charge a tenant to live in the property, instead of your current salary. You will need to make sure the rent you charge will cover your mortgage repayments and any extra fees such as insurance and building management costs.
