What is a Buy To Let Mortgage?
John Mussi
This type of mortgage is similar to most others however the buy to let mortgage is designed for people who buy a property with the intention of letting it out.
Buy to let is purchasing a property, letting it to tenants and using the income from their rent to pay your mortgage. Essentially you have someone paying your mortgage for you, but the huge positive aspect is that at the end of the mortgage you have a valuable property and you have had someone buying the property for you with their rent. In summary a buy to let mortgage is simply a mortgage that allows you to purchase a property that you intend to let out.
A buy to let property can therefore been seen by many as an investment. The principle is simple: buy a property, let it to a tenant, and this money should pay the mortgage, perhaps with a little left over each month.
Buy to let mortgages are becoming increasingly more popular as in recent years the property market has proven to be a good investment. However, a buy to let mortgage is not so simple. First, you must be able to raise a significant deposit. Second, the rates on the buy to let mortgage may not be the most attractive on the market, although the market is competitive and there are many decent options available.
Normally people looking for a buy to let mortgage are looking to use their existing property to secure a mortgage on a second property.
A buy to let mortgage is a way to enable you to invest in property. The criteria for lending is worked out differently to a standard mortgage, however there is no limit on the number of properties you may buy to let.
The difference is that the maximum loan-to-value (LTV) is usually lower, meaning that a larger deposit is required. Other restrictions may also apply, such as minimum letting terms and rental income.
Lenders will normally incorporate a proportion of the rental income when calculating how much money they are willing to lend you. With a residential mortgage, the total mortgage repayments are based on the applicant's salary. However, since a buy to let mortgage is used to finance the buying of a property for rental purposes, the borrower must prove that the rental income will cover the buy to let mortgage.
The big difference compared to a standard home loan is that most lenders won't just take your salary into account when assessing eligibility. Potential rental income from the property is normally the most important factor in assessing affordability. Another important difference is that a minimum deposit of 15% is required.
Buy to let investors should also consider the downsides. Will you be able to let the property? Will you be able to let the property all year round? Prudence dictates that in calculating whether you are able to afford a buy to let mortgage, you should see whether you would have enough income to support the second mortgage payments when you are unable to secure a tenant.
You may freely reprint this article provided the author's biography remains intact:
About the Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.
The latest information and news on Mortgages:
Mortgage rates hit decades-low of 4.32 percent
Mortgage rates fell to the lowest level in decades for the tenth time in 11 weeks, as investors worried about the economy.
Mortgage rates hit record low: Freddie Mac
U.S. mortgage rates fell in the past week to the latest in a series of record lows as yields on government debt dropped, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.
Mortgage rates at record lows
WASHINGTON (AP) - Mortgage rates have fallen to the lowest level in decades for the tenth time in 11 weeks.
Mortgage rates still heading south
Mortgage interest rates have fallen for the 10th time in the last 11 weeks, according to Freddie Mac's report on what lenders are offering to borrowers with solid credit and 20% down payments or home equity. Freddie Mac's weekly survey...
Mortgage Bankers group spent $745K lobbying in 2Q
The Mortgage Bankers Association spent $745,000 in the second quarter to lobby the federal government on issues including banking regulations, housing issues and reforms to the financial system.
Yahoo! News Search Results for refinance
Home mortgage refinance rates are low
Home mortgage refinance rates are low right now. How can you capture the best rate?
Owners decide to keep EQT Plaza, refinance debt
The 32-story EQT Plaza, Downtown, has been pulled off the market as its owner, Blackstone Group of New York, has decided to refinance its debt and retain ownership.
Dana Blair of Love Funding Closes $6.56 Million Refinance Loan for Multifamil...
Dallas - Love Funding today announced that its Dallas office closed a $6,560,000 non-recourse loan for the refinance of Aspen Chase, a 288-unit multifamily housing complex located in Dallas.
More homeowners rush to refinance
Low rates means more homeowners are looking to refinance but a shaky housing market puts the damper on new mortgages.
Should you stretch out a refinance?
It might make more sense to increase the length of your mortgage to free up some cash.