A buy-to let mortgage is a home loan to buy an investment property.
A lender will not offer a standard mortgage on a property that you don’t intend to live in, so if you are buying a second property you will have to take out this kind of loan. In many ways these mortgages are the same as standard deals, and the application process and costs involved will be similar. The rates on buy-to-let deals tend to be higher than those on residential mortgages, but the margin is falling. And the choice of mortgages is growing - you now get the same choice of discount, fixed rates and trackers as is available in the standard mortgage market. You will, however, need a substantial deposit, as most lenders limit borrowing to 80 per cent loan to value (LTV). Many lenders are willing to base the amount they will lend purely on the anticipated rental income, so you don’t need a huge salary to get involved in buy to let. The lender will usually insist that the expected rental income exceeds your mortgage repayment by a certain percentage - usually it will expect a rental income of 130 per cent of your monthly mortgage payments. It may ask for a statement of the expected income from a letting agent, or rely on the valuer to provide an estimate when he surveys the property. Some schemes allow you to build up a portfolio of properties by remortgaging one rental property to raise a deposit for the next. If you are planning to become a serious investor, it may be worth asking about this at the outset. Before you choose a lender, make sure it offers the scope you need. Most lenders will restrict the number of properties in a portfolio and the total amount you can borrow.
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Date: 1st, April, 2006 |
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