If you’re thinking about taking out a mortgage, it’s important to know the difference between buying a property for yourself and buying one for investment purposes. Both involve putting down a large deposit and securing a loan in order to buy your dream home or start building up equity in an investment property. But the two types of mortgages are very different and come with different requirements and restrictions on how they can be used.
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A buy-to-let mortgage is usually a repayment mortgage
A buy-to-let mortgage is a repayment mortgage. This means that you pay off the loan over a set period of time, usually 25 years or so, in monthly instalments to the lender. The amount of money you pay each month depends on the size and duration of your loan. Commercial Trust experts say, “If you have own or several other properties, you could remortgage to a higher LTV to raise a deposit for another property purchase.” So 85 LTV buy to let mortgages are one option too!
A residential mortgage is more likely to be an interest only mortgage
Residential mortgages are more likely to be interest-only mortgages. These products tend to be offered on a fixed rate basis, lifetime basis and repayment basis. Interest-only mortgages are most commonly used for Buy-to-Let properties because the borrower will want their home loan to be repaid over a shorter period of time than with residential loans.
A buy-to-let mortgage is more likely to be offered on a fixed-rate basis
A buy to let mortgage is more likely to be offered on a fixed-rate basis. Under this arrangement, you agree to pay the same interest rate throughout the term of the loan and are locked into that interest rate when it’s agreed. Because of this, buy-to-let mortgages have become popular among would-be landlords who want to be sure about their monthly payments for several years at least.
A buy-to-let loan will generally be assessed on affordability, whereas a residential loan will be assessed on the credit score and income
There is a difference between the two. A buy to let mortgage will generally be assessed on affordability, whereas a residential loan will be assessed on credit score and income.
You don’t need to live in the property with a buy-to-let mortgage
If you apply for a buy-to-let mortgage, you are not required to live in the property. This means that you can let out the property while also renting out rooms or even parts of your house. You can also choose to rent out a garage if it’s attached to your home and will help pay off some of your mortgage costs.
You can’t let out all the rooms of your property with a residential mortgage.
If you want to let out all the rooms of your property, then a residential mortgage is not for you. But if you just want to rent out one room, this type of mortgage may be right for you. You can also live in the property with a residential mortgage as long as it’s your home. However, if it’s not your main home and you don’t intend to live there, this type of mortgage is not for you either—you need a buy-to-let loan instead.
In conclusion, a buy to let mortgage is a great way to invest in property. However, if you are considering buying your first place, a residential mortgage might be more appropriate for you.