The amount you can borrow with a BTL mortgage is based not on what you earn, but on the potential rental income from the property you buy and its value. Please try our mortgage calculator to find out how much you could borrow.

There are two ways of paying your mortgage - interest-only or repayment

Interest-only
With an interest-only mortgage, your monthly payments cover the interest on the mortgage but not the capital (the amount you originally borrowed). So at the end of the mortgage term, the capital of the original mortgage is still in its entirety and must still be repaid.

Repayment
These are the most popular type of regular residential mortgage. With these mortgages, your monthly payments repay both the interest owed, plus a small amount of the capital (the amount you have borrowed) until the mortgage is paid off in full.

Modern BTL mortgages are paid using the interest-only to lower the monthly payments and keep them within the rental being achieved from tenants.

The main way to answer this is to ask this is which is more important to you, security or smaller payments? 

With a fixed rate the rate doesn't change during the offer period.  So a fixed rate of 5% for two years means this is exactly what you will pay for two years regardless of any changes to UK interest rates or anything else and so you are 100% confident of your outgoings for this period. 

A tracker rate mortgage is a mortgage that tracks another rate - usually the Bank of England's base rate. The advantage of the tracker mortgage is that all falls in the interest rate are automatically passed on to the borrower - the downside of course is that the increases are also passed on. 

On the whole discount rates are likely to have lower interest rates and monthly payments, but fixed rates are safer.  There can of course be exceptions to this rule.

The gross monthly rental income must represent a specified percentage of the interest-only monthly mortgage repayment (usually 100%, 110% or 125%). So, for instance, if you estimate a monthly rental income of £550.00 at 110% rental cover, your monthly interest-only mortgage repayment will not be allowed to be more than £500 (100%). These rental figures would then be subject to confirmation by a surveyor. This process can be reversed and you can also work out the market rental value that would be required to achieve the rental cover on a particular mortgage product.

There are a number of options should the surveyor’s valuation of the current market rental not provide the rental coverage of the amount you wished to borrow. 

If you think the property’s rental has been undervalued for the current market in the local area then you can submit rental comparables of similar properties that are achieving a higher rental to try to influence the surveyor to raise their valuation. 

Alternatively you may have to leave more equity within the property than originally anticipated to lower the loan to value and secure an acceptable rental cover for the lender. 

Also there are products in the market that will allow you to apply for a BTL product that is based on the affordability of your income rather than on a rental calculation but you must take additional care that you will be able to afford the payments now and in the future.

This is not necessarily a problem, there are many mortgage companies who can provide a BTL mortgages to clients who are not able to furnish the necessary evidence to prove their income level - This can apply whether you are self-employed and have no income proof, or if you are employed, but are not able to furnish relevant pay-slips and therefore need to self certify your income level.

Application fees
For many of the best mortgage deals a mortgage lender will charge an additional fee.  Fees for BTL mortgages can either be a flat fee or a percentage of the loan amount. 

Valuation fees and surveys
A lender will need security that the property they are lending against has the level of secuirty to warrant the loan amount.  Ths requires a property survey which will ascertain to their satisfaction the current market value of the property and the expected market rental valuation. Fees for valuations usually start at around £295 and increase on a sliding scale in relation to the expected pruchase price of the property

Solicitors fees
Expect to pay around £500-£1,000 for your conveyancing in relation to buying a property.

Home and contents insurance
Mortgage lenders will require that you have buildings insurance in place before they will complete on the mortgage, often offering insurance themselves, it is often worth shopping around to get the best deal but also to be mindful that the lowest price is not always going to be the right product and having correct cover and confidence in the event of needing to claim can be far more important.

Life assurance
Life assurance is a product that pays out a lump sum in the event of your death. Some mortgage providers will insist that you take out a life assurance policy to cover the value of your mortgage. Others will not. So this may be an additional cost you have to factor into your calculations. Again, you'll find getting life insurance elsewhere will usually save you money.

Mortgage payment protection insurance
This is a form of income protection insurance designed to help you pay your mortgage if you become unemployed, have an accident, or fall seriously ill. The more circumstances you wish to cover, the more expensive the monthly premiums.

Stamp duty
Please see below.

You pay Stamp Duty Land Tax on property like houses, flats, other buildings and land. If the purchase price is £125,000 or less you don't pay any Stamp Duty Land Tax at all. If it's more than £125,000, you pay between one and four per cent of the whole purchase price, on a sliding scale.

£125,001 – £250,000  – 1% of the purchase price

£250,001 – £500,000  - 3% of the purchase price

£500,001 +                - 4% of the purchase price 

More information regarding Stamp Duty can be found on HM Revenue & Customs.

Freehold - You are the owner of everything - the land and the property, and are therefore responsible for all maintenance and repairs.

Leasehold - A lease is a contract between a leaseholder and a landlord. It gives you the right to occupy the property for a set period of time.

Most leases will last for between 99 and 120 years. If they are significantly less then 75 years you may have difficulties securing a mortgage. The majority of leaseholds are flats. The landlord owns the structure and common parts of the property and the leaseholder owns anything within the external walls. You will need to share the costs of the service charge and maintenance of the block with the other leaseholders within the property. The lease should stipulate who is responsible for maintaining and repairing different parts of the property. Make sure that money is being set aside in a collective emergency fund to cover unexpected costs like roof replacement.

'Conveyancing' refers to all the legal and administrative work associated with transferring the ownership of land or buildings from one owner to another. The conveyancing process starts after an offer has been made and accepted for a property, and solicitors' details have been exchanged by the two parties.

Most people hire a solicitor or licensed conveyancer to undertake the legal side of buying their home. Although professional services can be expensive, they have become cheaper in recent years and it is well worth the cost to successfully complete the purchase and to resolve any possible problems.

A decision in principle is usually given to mortgage buyers by a lender before they complete the formal application process for a mortgage. The lender will perform a credit check to ascertain whether they would be happy to lend the requested figure to an individual(s). The offer is not binding however and all other application criteria will also have to be met before the lender will supply a mortgage offer a decision in principle may also speed up the mortgage application process as lenders will begin processing your potential application at this point rather than waiting until you make a formal application.

There is no correct length (term) to a mortgage. The standard term is for 25 years, and with large sums involved this spreads the cost and makes your monthly payments more manageable.

 However, you can choose a different term if it suits you and the lender agrees that you can afford it. If you can afford a shorter term you may have higher monthly payments but pay less in total (see table below). With a longer term, you may pay less each month but more in total. Another point to be noted is that lenders are often reticent to allow a mortgage to run past retirement age, whenever that is expected.