Things are a lot easier for landlords these days. It used to be that in order to buy a property to rent it out you had to apply for a commercial mortgage, which is more expensive and difficult to arrange. Things have changed and these days buy to let mortgages are available from all main mortgage lenders.
If you are a home owner, it is possible to release some equity from your home through a remortgage deal. It is then possible to use the money as a deposit for a buy to let mortgage.
Lenders tend to see a buy to let mortgage as an investment with more risk than a regular mortgage for a owner occupied property. Because of this the fees for a buy to let mortgage tend to be higher than other mortgages, but this varies a lot from a lender to another.
In order to determine how much you can borrow, lenders use different methods. Some will use your income as the main factor and may also take into account the estimated rent you are likely to obtain from the property.
Other lenders will only use the rental figures in their calculation. Formulas vary between lenders, but as a general rule lenders would expect the rent to be 125% of the mortgage payment as a minimum.
Buy to let mortgages have good a lot of tax aspects attached to them, so it is crucial for new landlords to seek advice as soon as possible. It is for example possible to claim the interest payments on the mortgage as a cost, unlike the capital mortgage repayment. As a result of this, many buy to let mortgages are interest only.
If things go well with your first property, maybe you will be able to repeat the exercise with additional properties. Some lenders are happy to provide up to 10 mortgages if they get assurance that the property is well managed and that the rent covers all the mortgage repayments adequately.
If you decide to go a ahead with a buy to let mortgages, it is important to be well prepared. The internet has got good resources for landlords, so it is crucial that you familiarise yourself with all aspects of buy to let before you apply for a mortgage.
- buy to let explained
The principle of buy to let mortgages is generally self-explanatory - the buyer is looking for the funding to purchase a property in order to let it out to tenants and thereby earn a business income or a return on the investment in the bricks and mortar.