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In terms of rights, whats the difference between getting a regular mortgage and a buy-to-let mortgage for a property in the UK?

For example, if I wanted to invest in a property, and got a regular mortgage, instead of a buy-to-let mortgage, will I be legally stopped from renting that property out?

I.e, I don't understand why buy-to-let exists if you can simply get a regular mortgage with a smaller deposit and rent it out?

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Your last sentence says "Why would you do X if you could just do Y?" - the obvious answer is, you can't do Y. Example wording from the Halifax - they'll all be the same – AakashM Jul 31 '14 at 11:22
up vote 9 down vote accepted

Residential mortgages normally explicitly state that the property cannot be let without explicit permission, whereas BTL mortgages typically require that the property be let.

There are other differences. Residential mortgages are regulated, which means that consumers have a degree of protection from mis-selling; most BTLs are not, as landlords are expected to know what they're doing.

Affordability of residential mortgages are based on your income, since that is how you are going to pay for them. BTLs are (mostly) assessed based on the property's rental income, since it's that that will fund the mortgage.

Finally, residential mortgages are typically done on a repayment basis, so that at the end of the term, you've paid off the entire loan, whereas BTLs are typically interest-only, on the assumption that you'll either sell the property, or remortgage, at the end of the term.

(I've used words like "typically" a lot to give an overall picture of the differences. Obviously it's a bit more complicated than that, and there are exceptions to a lot of the above descriptions.)

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In my experience buy-to-let mortgages charge a higher rate of interest than an personal residential mortgage. They are regarded as a business enterprise and presumably the banks calculate that they carry a higher risk. A bank would probably take action if the property on an ordinary mortgage was rented out, as you would be breaking their terms. Policies could be rendered void. The terms on an ordinary mortgage disallow renting out the property.

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