Buy To Let Mortgages - All The Basics You Need To Know

Most banks are not keen on borrowers renting out any part of their property when they have a mortgage unless it is a specific mortgage called a buy to let. The buy to let mortgage means that you have more protection too.

What Does the Lender Require For Buy To Let?

The valuation of a buy to let property is slightly different from that of a normal mortgage. The property acts as security for the loan and so is still subject to repossession if the repayments are not kept up. However the lender is chiefly interested in the rental value of a property. This is how repayments are normally financed, so rental value must be higher than the repayments (or it is a lot of effort and hard work on the borrower's part for no return)

Lenders who are entering into arrangements with buy to let mortgage borrowers will still usually require that the borrower have an income. Should the property be empty for any period of time, the lender wants to be sure that you can still afford to repay the mortgage. Most tenants tend to have short term let us so the likelihood of properties standing empty for some part of the time of the loan is high.

What Are The Advantages?

The obvious one is that your mortgage is actually being paid by the tenant. So the property is increasing in value and increasing in equity without you having to put too much of your own income into the property.

How Much Down Payment Do You Need?

Until the Credit Crunch in 2008, Buy To Let us were incredibly popular as house prices sky rocketed in price from the 1980's onwards, 90% added value in some cases was not uncommon. With the drying up of mortgage availability and the house prices contracting, they have dropped off sharply and as of the time of writing, are still to recover.

What Deposit Do You Need For A Buy To Let Mortgage?

You will normally still need to have an income so that if the property is empty the lender knows that you can afford to cover the mortgage for that period, although income levels do not generally need to be so high, as such circumstances should only be temporary.

Make Sure You Research The Market

We cannot stress this enough, always shop around for the best mortgage rates, if you think you have a found a killer mortgage rate, keep looking just in case.

Seek Advice If Necessary

Mortgage brokers are professionally trained and qualified. This means that they have an excellent knowledge of how buy to let mortgages work as well as access to a wide range of mortgage deals from throughout the UK market. You may pay a mortgage broker a fee for their services, but this may well be worthwhile if they can find a market leading buy to let mortgage for you.

Think About The Area

Think logically if you are buying a property that you want to rent out it needs to be in a place where people will want to rent. Near a school, close to shops and bus routes all of these things will add to its appeal. Making sure that it is in a good state of repair will also increase its attractiveness.

Get Insurance

It is required building and contents insurance is needed, contents especially if you are offering a furbished property. Building insurance will be demanded by the lender's already, never forget to expect the worse such as fire, you want to be covered for every eventuality.