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Residential or Buy to Let – What’s the Difference?


Buying home insurance online for properties to rent out is increasingly popular. Taking on the mantle of a landlord is a great way to better control your revenue streams. Yet, this can require that you get specific kinds of mortgages. Today, we’ll help sort out any potential confusion about this topic, as well as some guidance for new landlords looking to purchase insurance coverage. This includes answering the question of if you can buy home insurance online. 

Residential Properties 

When you think of the word “mortgage,” you probably think of a residential mortgage of someone who just purchased a home to live in. Generally, a residential mortgage is a loan used to purchase or to maintain a piece of property. 

Getting a residential mortgage can sometimes be an extensive process. The lender will carefully examine the income of the home buyer, alongside many other credit checks and decide if they think that the mortgage will be payable based on the existing financials of the person interested in getting approved. 

Usually, a mortgage pays out over time – you make money, then make mortgage payments on the house you live in, with interest on a monthly basis. 

However, not everyone who buys a house intends to live in it as their primary residence. Some people plan to lease the home to someone else. In this case, the house can actually make the home buyer some money. If this is the case and the intention of the home purchase, a different kind of mortgage is used, known as Buy to Let. 

What is Buy to Let?

If you want to be a landlord, you’ll be getting a Buy to Let Mortgage instead of a residential mortgage. The basic idea of this kind of mortgage is the same. You are borrowing money from a lender to insure a property.

There are some differences, however. For starters, the amount of money you can borrow is less determined by your income and more by what rent you intend to charge your tenants. The lender will generally base a buy to let mortgage on rental rates in the area your property was purchased. 

Fees will be slightly higher with a buy-to-let mortgage, with as much as 3 percent of the property value. There may also be more restrictions (depending on your area) on if you are eligible for a buy-to-let mortgage. Lenders will generally require a minimum income and will want the money you make from rent to cover the mortgage and then some. The lender will examine the income from your regular employment, if any, as well as any other loans you have. 

Why This Difference In Mortgages Matters 

So why does the kind of home insurance quote and type of mortgage you get actually matter?

Firstly, it matters legally and will need to be understood in case someone ever files a claim. If you try to apply the wrong kind of mortgage to your property, it’s considered mortgage fraud.

Buy-to-let mortgages are generally considered riskier than residential mortgages and often require larger deposits upfront. 

What kind of mortgage you get will also influence the kind of insurance you get and how this applies to liability coverage. When people look up if they can buy home insurance online, they must understand the kind of insurance they are looking for before making the purchase.

Residential home insurance will cover your house and your belongings of what’s inside of it. But if you are renting out your space, you will need separate landlord insurance. Landlord insurance covers you both in the case of damage to the property should you need repairs or replacements due to your tenant and in the case of lost rent due to unforeseen circumstances. Landlord insurance can even cover you in the case of legal liability if someone is injured on your property. 

Getting Landlord insurance is important. However, it can sometimes be difficult if you intend to rent out some unconventional homes. Getting manufactured home insurance and modular home insurance can sometimes be complex if you don’t know exactly what you’re looking for when submitting a quote online.

Buying Home Insurance Online

Thankfully with CoverTree, you can easily buy home insurance online, including homeowners insurance and landlord insurance for all your home needs, including mobile or manufactured homes, basement apartments, and more. Doing so just takes three easy steps and no more than three minutes. 

So no matter if you are renting or buying, purchasing home insurance online is just a few clicks away!

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