Buy to let mortgages; How do they work?

Buy to let mortgages; How do they work?

Buy to let properties are becoming ever popular in the UK nowadays, according to Finder UK over 234,000 buy to let mortgage loans were taken out in the last 12 months. So, we thought we’d put together this brief guide explaining how buy to let mortgages work. 

What is a buy to let property? 

It is the purchase of a property that you will rent out to somebody else. 

You can use a specific buy to let (BTL) mortgage to purchase the property. This means you can buy property as an investment without needing to save up the full amount to buy it outright. You then let out the property and act as the landlord for the people who rent it. You charge them rental payments to cover the mortgage and your other costs. 

How do you make money on a buy to let property? 

There are two main ways for you to make some money on your buy to let property. These are:  

  1. Rental income: The rent you charge should be more than your monthly mortgage repayments cost. You may have some other costs included, such as repairs or letting agent fees, but it should still be a sufficient amount for you to keep some for yourself. 
  1. Capital growth: You can also make money if you can sell your property for more than you paid for it. The property’s price would have to increase more than the rate of inflation. 

Are there any tax implications when selling the property or on the rental income? 

Absolutely. You will have to pay tax on the profit you make from your buy to let investment, including: 

  1. Income tax on profits you make from rental income 
  1. Capital gains tax on profits you make from selling the property 

However, there are some allowable expenses that can be used to reduce your tax liability. We recommend speaking to a qualified accountant or a tax adviser for clarification on what these are. 

Who can get a buy to let mortgage? 

Each lender will have different requirements for buy to let mortgages, but will only accept the mortgage application if they believe that you can afford it. 

They will base this on the amount of rental income the property is expected to receive and also your own personal financial circumstances.  

The team here at Mortgagez have a wealth of experience when it comes to helping you obtain a BTL mortgage due to the fact that many of our mortgage brokers either own or manage a number of BTL properties themselves. As BTL mortgages cannot be administered via our online mortgage portal, Mortgagez may need to charge an administration fee of up to £495 to help our customers source this more specialist type of mortgage but this may vary depending on the nature of your purchase – please just ask a member of our team and we will do our best to guide you.   

PLEASE NOTE: Article written 2nd June 2021. Information contained within this article is likely to change and therefore should not be relied upon or form part of any form of decision making without seeking professional advice. * 


Any guidance and/or advice contained within this document is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK. Any technical or regulatory information contained within this document was correct at the time of producing it but as it may be subject to change it should not be exclusively relied upon when making a financial decision. The Financial Conduct Authority does not regulate advice on Buy to Let mortgages.  

Article written: June 2021                                                                                                            060121 MZ000209 

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