Buy-To-Let Mortgages

Buy-to-let mortgages are becoming increasingly popular, as lenders respond to the high demand for rental properties. So if you've got the perfect rental investment in mind why not take advantage of the flexiblity of a buy-to-let mortgage.

About Buy-To-Let Mortgages

The way in which lenders consider the viability of a buy-to-let mortgage differs to that of a residential mortgage, instead of considering your income the lender will instead require the potential monthly rental income to be 130%-125% of the monthly mortgage repayment. Expect to pay a little than you would with a residential mortgage, even if the rate seems competitive the associated fees are likely to be significantly higher, you will also require a large deposit.

Choosing The Right Buy-To-Let Mortgage

The first decision to make is whether or not you should opt for an interest-only or a repayment mortgage, The decision should be based on your investment stratergy, are you looking to achieve a return on investment through the rental income or the increased equity as the property value increases? An interest only mortgage will reduce your monthly outgoings and maximise the profit from the rental income but the only way to pay off the mortgage will be to sell the property. For example a student house may not increase in value as quickly as a well located town house but will likley realise a higher rental income, where as the town house willl probably be worth more in years to come. If you decide a repayment mortgage is best for you you'll find a similar scope of available mortgages including fixed rate, tracker, flexible and discount

What To Look Out For

Buy-To-Let mortgages are seen as higher risk than conventional mortgages, consquently interest rates aren't as competitive and to achieve the lowest rates you will need a sizeable deposit, at least 25% usually and 40%+ to get the best deals. Arrangement fees are also likley to be high, usually based on a percentage of mortgage loan and following the initial rate period most buy to let mortgage will revert to tracking the lenders SVR, proving expensive so don't forget to get a remortgage quote.