Buy to Let Mortgages are loans specially designed for anyone who wishes to invest in the property market by buying one or more houses and renting them out to tenants. Buy to Let Mortgages differ from previous investment vehicles by specifically using the rental revenue as the main factor when determining the ability of the buyer to meet the monthly mortgage payments. Many high street banks and building societies now offer a buy to let mortgage product. The percentage which the buy to let lender is willing to lend is likely to be restricted by many lenders to 85% of the value of a property.
Buying Property
Buying property to let has become increasingly popular to the UK investor. Buy To Let mortgage lenders differ in approach. Buy-to-let borrowers do have to jump through some extra hoops to satisfy mortgage lenders. The buy to let mortgage term can be anything between 5 and and 45 years. If you are considering buy to let property as an investment then it is important that you have a good understanding of the current market.
Buy To Let Property
The more you are willing to do a property up, the higher the potential profits. There is the danger that the property could lie empty for long periods and the market could suffer a downturn. There is a real advantage if your buy to let property is close by as you will be able to manage the property yourself. However, if you are employing the services of an agent then the vicinity of your properties is not a real consideration. One rule of thumb many buy-to-let investors apply is to factor in the property sitting empty for two months of the year this gives a substantial buffer. Finding the right property is key to the success of your long-term strategy.
Buy To Let Mortgages
Popular perception is that buy-to-let mortgages are hugely expensive and very restrictive. However, the interest rates available for buy to let products is really not that much higher than a regular residential mortgage. Landlords also have a choice between interest only and repayment mortgages. For starters, buy-to-let mortgage lenders base their decisions on whether or not to approve a loan on the likely rental income from the property and not the applicants' income. Over the long term, though, both the capital value of the property and the rental income should go up, making buy-to-let a balanced investment. Usually, regular buy to let lenders will demand the rent to cover at least 125% of the monthly mortgage payments. However some specialist lenders are more relaxed and may only require 100% full coverage.
Buy to Let mortgages are not regulated by the Financial Services Authority. Although buy to let property can make sound investment you must do your homework before you begin.
Buy to let is becoming more and more popular because of low interest rates and the seemingly attractive income generated from rental property. If you are thinking about buying a house to let, then you need to know about buy-to-let mortgages. These mortgages are fairly new, and are slightly different from normal mortgages. Here are some useful tips to help you decide about buy-to-let mortgages:
How are buy-to-let mortgages different?
Buy-to-let mortgages are different from traditional mortgages; mostly in the way that the amount you can borrow is calculated. With a traditional mortgage, the amount you can borrow is based upon your income. With buy-to-let mortgages, the amount you can borrow is based both upon your income and the possible rental income you will earn. This can allow you to borrow more money than you would normally be able to for a mortgage. However, any mortgage you have on your current home will reduce the amount that you can borrow
What are the costs?
Buy-to-let mortgages are like normal mortgages and so their price varies from lender to lender. However, in general they are more expensive than normal mortgages. Lenders will usually lend you up to 85% of the property value, although you can better deals if you put down 20 or 25% as a down payment. The interest rates are usually higher than traditional mortgages, but the prices have come down as more lenders enter the market. The amount you can afford to repay should be looked at against the amount of rent you will earn. Generally, the rent you are going to obtain should be around 130-150% of the mortgage repayment.
Where can I get a buy-to-let mortgage?
Buy-to-let mortgages can be obtained from an increasing number of lenders. One of the largest agencies is the Association of Residential Letting Agents (ARLA), although there are other alternatives and it pays to shop around for the best deal.
What are the dangers?
The dangers, as with any mortgage, are that you won't be able to make the repayments. This is even more of a danger for rental property, because if the property is not currently being rented you are losing valuable income, whilst still paying the mortgage. If you cannot rent your property for a while then you could lose both your rental property and your regular home because of mounting debts. Make sure that the property you choose is desirable and that there is demand at the price you want to charge. Also, you need to remember that buy-to-let mortgages are not regulated in the same way as regular mortgages, and so you are more open to being misled. However, if you are going to buy a property for investment, then a buy-to-let mortgage might be the best option for you. They are especially useful if you are looking to invest in a property that is slightly above your normal budget.
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James Grantworth has sinced written about articles on various topics from Finances, Property Guide and Finances. James Grantworth is the Marketing Director for Let Mortgages Limited specialising in Buy To Let Mortgages with minimum capital investment. For full details of our exclusive no money down. James Grantworth's top article generates over 165000 views. to your Favourites.
Peter Kenny has sinced written about articles on various topics from Credit Cards, Finances and Best Money Market. Peter Kenny is a writer for creditcards-gb.co.uk.For additional articles and an extensive resource for everything about credit cards, please visit us at . Peter Kenny's top article generates over 368000 views. to your Favourites.