What Is Buy To Let?

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. When buying to let it is important to know the market in which you will be trying to let your property.

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. The advantage of a property close by is being able to keep an eye on it, but if you will be employing an agent anyway they should do that for you. 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 rate available on a buy-to-let mortgage is generally not significantly higher than those on standard mortgages. 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. Traditionally buy-to-let lenders want rent to cover 125% of the mortgage repayments, although some are relaxing this, and interest rates are higher.

Buy to Let mortgages are not regulated by the Financial Services Authority. Even though buy to let property is a fairly safe investment taking into consideration the historical movement of house prices, you still need to check the market very carefully before going ahead with a purchase.