How are buy to let mortgages different to residential mortgages?

Mortgage advisors

Firstly, a big point to make from a brokers stand point is that buy to let mortgages are not regulated by the FCA (Financial Conduct Authority) in the same way that residential mortgage are.

This is because they are classed as a commercial mortgage, and in some respects you dont get the same protection taking out a BTL mortgage than you would if for example you wanted a regular mortgage to buy a new home or remortgage your existing property.

This means that it is much easier to become a buy to let mortgage advisor, and you dont have to deal or worry about issues around regulation and the FCA.

From a borrowers point of view the 2 main points of difference are:

1. Rates are more expensive. Buy to let mortgages are more expensive and interest rates, fees and charges are higher if you compared against a residential mortgage. This is because buy to let is deemed to be higher risk, and a commercial money making venture.

2. A larger deposit is required. The minimum deposit you’ll need on a buy to let property is 15% (85% LTV mortgage) while the same on a residential mortgage would be 5% on a 95% mortgage. This means lenders require more security when you take out a buy to let mortgage. It is worth noting that 85% generally is the highest LTV for buy to let, but the RBS and Natwest both have 90% LTV products for existing customers only!