Buy to let mortgages are designed for people
looking to purchase a property which they will then rent out. Just
like any other mortgage, there is a vast selection of buy to let
mortgages available. Buy to Let Mortgages differ from normal
residential mortgages by specifically allowing the rental revenue to
be considered as income when considering the ability of the buyer to
meet the ongoing mortgage payments. How much you can afford to
borrow can be based on how much you earn or the amount of rent
expected from the property. Buy to let mortgages are very similar to
standard mortgages for property which the owner will inhabit, as
they are subject to the usual status checks, however there are
additional requirements.
Buy-to-let mortgages can be obtained from most banks and building
societies. They normally lend to a maximum of 85%, but lately
lenders are restricting lending to 75%.
Another factor, which may limit the amount that you can borrow, is
rental cover. Most lenders will require that rent covers mortgage
payments by 125%.So if the amount of the mortgage you require fits
nicely in terms of loan-to-value, it may be restricted due to rental
income.
Interest rates for buy to let mortgage were traditionally higher
than for residential mortgages, but in the past few years they have
gone down substantially and don’t differ much. As with traditional
mortgage you can choose between tracker and fixed rates. Buy-to-let
mortgages can be arranged for terms of between five and 45 years.
Buy-to-let mortgages have become easier to obtain, and this coupled
with growing house prices, has led to a boom in the investment
property market over the past decade.
When you are considering purchasing a buy to let property, you must
not forget about other costs, which are associated with any house
purchase, as stamp duty, solicitors' fees, building insurance and
furniture. You should also account for service charge and ground
rent for leasehold properties, maintenance costs and repairs. It is
necessary to account for interest rates increase and to have an
emergency fund available to cover mortgage payments, when the
property is vacant.
Demand for private rental properties in the UK is still quite high
and many experts believe will continue to be strong in the years to
come.
Buying a property to let is a long-term investment which should
generate an income from rents and a capital gain when you sell the
property. There is no guarantee that you'll make a profit as with
any investment. Buy to let morgages should be taken seriously as any other
business. To succeed, you should study local demand, the type of
properties that are sought after, and know popular areas.
