Here we'll show you how the two differ.
Buy-to-let mortgages work in the same way as standard mortgages in that you take a loan and then repay it every month.
Interest rates are typically around 1.5% higher than standard mortgages, as the lender will consider the loan as a greater risk.
This is because landlords usually rely on rent from their tenants to pay the mortgage, so if the property is left vacant for a while – this is known as a 'void' period – then there is a risk the landlord will default on the mortgage.
Buy-to-let mortgages require a bigger deposit too. Usually of a minimum of around 20%, compared to the minimum 5% you'll need on a standard mortgage deal.
If at this point you're thinking of taking out a residential’ mortgage then renting out the property anyway, think again. This is a type of mortgage fraud and could see any mortgage deal being withdrawn.
And if you're looking to buy a property to rent out, bear in mind you might not be offered a buy-to-let mortgage if you don’t own your own property already. Also, some lenders have a minimum income requirement £25,000 a year.
As with standard mortgages, the amount you can borrow is linked to your income, but it's also linked to the level of rent your property is likely to generate and usually must equate to a sum that is between 25% and 30% higher than your monthly mortgage repayments.If you're unsure how much rent a property will generate, contact lettings agents in the area and ask how much they think you'll be able to charge. You could also check out local property mags and newspapers to give you an idea of the sort of rents similar properties command.
And don't forget to shop around when choosing a mortgage provider. Although most major banks and building societies, as well as some specialist lenders, offer buy-to-let mortgages, rates can vary, so it’s best get professional advice and shop around to get the best deal.
Remember to check for any arrangement fees too, as these can add substantially to the cost of any mortgage deal.