Buy to Let

April 5, 2017

Buy to Let is a term that really came into common knowledge during the rental property boom of the early 21st century, when mortgages of all kinds were at their easiest to get approved, and a relatively large number of people started to view property investment as a legitimate alternative to a pension.

In a buoyant rental market, it’s a way to get on to that investment ladder, in the same way that a first-time buyer’s mortgage helps them to buy their first home without the cash to pay the full purchase price outright.
Buy to Let specifically refers to a property bought in order to rent out – you usually cannot be a permanent resident of the domicile yourself – and there is a very clear distinction between this kind of rental mortgage, and those designed to help you buy a property to live in yourself.

What is meant by the term ‘Buy to Let’?

In principle any property you buy solely to rent out is a ‘buy to let’ property, but in practice you will almost exclusively hear the term used in the context of Buy to Let mortgages.

These are special mortgages that cater particularly for landlords, and take into account some of the specific risks faced when renting a property out, as well as the financial return you will receive from doing so.
Buy to Let mortgages are generally slightly more costly than a standard domestic mortgage would be on the property – but the rental income should more than cover the repayments, leaving you with an income from the rental surplus and an ever-increasing amount of capital in the property as time goes by.

Remember, a Buy to Let mortgage usually specifies that you cannot be a permanent resident of the property yourself, so it’s important to let your lender know if circumstances change and you decide to move in.
Can I just buy a house and then let it out further down the line?

In principle, yes. During the recession there was an emergence of ‘reluctant landlords’ who rented out spare rooms as a source of extra income, and there’s nothing to stop you from renting out an entire house if you want.

The most likely restriction on this is if you have an outstanding mortgage on the property, as standard domestic residential mortgages often forbid you from renting the property out, or even subletting a spare room.
You should speak to your lender if you are considering letting out all or part of your property, to avoid falling foul of any such restrictions in your mortgage – and if you are moving out completely but want to be able to rent your home to new tenants, you may be required to switch to a Buy to Let mortgage product.

Buy to Let FAQs

Buy to Let has been an area of growing interest since the property investment boom around the turn of the Millennium, and many of the same questions crop up time and time again.

Q: What is Buy to Let?
A: buy to let property is a property bought for the purpose of renting to individual(s).

Q: Are there any main differences from just buying a house?
A: No differences from a legal perspective other than the terms of the mortgage can vary on a residential mortgage to a buy to let mortgage. You cannot buy a house you intend to rent under a tenancy agreement with a buy to let mortgage.
Sometimes, a purchaser may buy a property which already has tenants in situ which the buyer will take on post completion.

Q: What is to stop people from just buying a house then letting it?
A: You can do that if you are not having a mortgage. The term buy to let means you are buying to rent the property out and you can rent any property out (subject to any restrictions) but if you are having a mortgage you cannot rent the property out unless either your residential lender agrees or you have a buy to let mortgage.

Q: If I bought a house then decided to move in with someone else or go travelling, what would I then need to do to let it out?
A: Consult your lender – you may be able to rent the property to family members without changing your mortgage product but you should not rent the property out with the lender’s consent.

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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