Buying a property is not all about living in it yourself. Many borrowers use a house or flat as an investment by letting it out to tenants and then hoping any rise in property values will provide a profit when they sell it.

Unless you have the cash up-front, to finance such as investment, you will need a special buy to let mortgage.

How do buy to let mortgages work?

As with a standard mortgage, you can make the choice between a variable or fixed rate mortgage.

The difference comes in the repayment method. Most buy to let investors take an interest-only mortgage, where your payments only cover the interest, not the loan amount.

Rental income is designed to cover the mortgage payments and other costs so taking out an interest only mortgage keeps costs down. As mentioned, the bulk of the profit, if things go well, will come from selling the property.

Interest-only repayments are also tax-efficient as, at time of writing, you can deduct mortgage interest payments from an investment property from the rental income and only pay tax on the remainder.

Do lenders treat buy to let mortgage applicants differently?

Rather than consider how much you earn to judge whether you can afford to pay the mortgage, a buy to let mortgage lender will consider your likely rental income. That monthly income must usually be more than your monthly mortgage payments.

Lenders also typically require you raise a healthy deposit. This is largely as a result of many buy to let borrowers getting stung during the house price crash that occurred during the credit crunch.

The more of the property you own outright, the greater the cushion against house price falls as you’re less likely to fall into negative equity, where you owe more than your property is worth.

You may also be required to own your own home before successfully applying for a buy to let mortgage, so lenders have evidence you can manage a mortgage.

What are the risks?

As with any investment, you can lose money just as easily as you can gain it.

The two main risks with a buy to let mortgage is that you may not find the tenants which means you may not be able to cover mortgage payments; or that house prices fall which means you may sell the property for less than you bought it.

How do I get a buy to let mortgage?

As the market is complicated and the risks can be huge, unless you are financially savvy, it’s best to speak to an expert, such as a broker, to discuss your options.