A buy-to-let mortgage is for property developers or investors who plan to rent out their property rather than live in it themselves. Rental property mortgages work in much the same way as residential mortgages but with a few key differences. Buy-to-let mortgages are regulated by the Financial Conduct Authority under the same laws as residential mortgages.

There are two types of mortgages: interest-only and repayment. With an interest-only mortgage, the borrower pays only the interest, keeping the monthly payments lower than with a repayment mortgage. In the end, the borrower will have to repay the capital. In most cases, people sell their properties for profit, but if house prices decline, they may be worth less than they paid. In addition, borrowers repay both interest and capital each month with a repayment mortgage. As the payments will be higher than with an interest-only mortgage, borrowers will have to charge a high rent to offset them.