The length of a buy-to-let mortgage in the UK can vary depending on a number of factors, such as the type of mortgage, the lender, and the borrower’s financial situation. Generally speaking, buy-to-let mortgages tend to have longer terms than traditional residential mortgages, but there is no fixed length that applies to all mortgages. Here at Aventine Property, we offer deal sourcing services- from initial research to property completion.
In this article, we’ll explore the average length of a buy-to-let mortgage in the UK and the factors that can impact the length of your mortgage.
What is a buy-to-let mortgage?
A buy-to-let mortgage is a type of mortgage that is designed for people who want to purchase a property with the intention of renting it out. Unlike a traditional residential mortgage, where the borrower is buying a property to live in themselves, a buy-to-let mortgage is used to finance an investment property.
The terms of a buy-to-let mortgage can vary depending on the lender and the borrower’s financial situation. Typically, lenders will assess the borrower’s income, credit history, and the potential rental income of the property to determine the length of the mortgage and the interest rate that will be charged.
Average length of a buy-to-let mortgage
The length of a buy-to-let mortgage can vary depending on the lender and the borrower’s circumstances. Generally, buy-to-let mortgages tend to have longer terms than traditional residential mortgages, with terms ranging from 10 to 35 years.
According to data from UK Finance, the average length of a buy-to-let mortgage in the UK is around 25 years. This is slightly longer than the average term for a residential mortgage, which is around 20 years.
Factors that impact the length of a buy-to-let mortgage
There are several factors that can impact the length of a buy-to-let mortgage in the UK. Here are some of the key factors to consider:
- Affordability
One of the main factors that can impact the length of a buy-to-let mortgage is affordability. Lenders will typically assess the borrower’s income and the potential rental income of the property to determine whether the borrower can afford the repayments.
If the borrower can afford to make higher monthly repayments, they may be able to opt for a shorter mortgage term. Conversely, if the borrower needs to keep their repayments low, they may need to opt for a longer mortgage term to spread the payments out over a longer period.
- Interest rates
The interest rate that a lender offers can also impact the length of a buy-to-let mortgage. Generally, lower interest rates will result in lower monthly repayments, which may allow borrowers to opt for a shorter mortgage term.
However, it’s important to note that shorter mortgage terms can result in higher monthly repayments, even with a lower interest rate. This means that borrowers need to consider their overall affordability and weigh up the benefits of a shorter mortgage term versus lower monthly repayments.
- Loan-to-value ratio
The loan-to-value (LTV) ratio is another factor that can impact the length of a buy-to-let mortgage. The LTV ratio is the percentage of the property’s value that the borrower is borrowing. For example, if a borrower is buying a property worth £200,000 and borrowing £150,000, the LTV ratio would be 75%.
Generally, lenders will require a higher deposit for a buy-to-let mortgage than for a residential mortgage. This means that borrowers will need to contribute a larger amount upfront, which can impact the length of the mortgage. If a borrower can afford to put down a larger deposit, they may be able to opt for a shorter mortgage term. Click here for more information about buy to let mortgage.