What Are Buy To Let Mortgages?

A buy to let mortgage is an excellent opportunity to cash in on the property boom at the moment - because while many homeowners can afford a 2nd home, there’s also a booming market for those who cannot afford to get a mortgage, and need to rent. Find yourself a good location and reliable tenants and your monthly repayments on your mortgage will be covered by their rental yield.

You will be able to obtain a Buy to Let Mortgage from all mainstream lenders following the recent revival of the rental market. It is an excellent investment opportunity as the amount you can borrow is not determined by personal income but by the potential rental income of the property. The rental income must in most cases, exceed the monthly mortgage repayments by 25%-30%, however to get started you will need a deposit of about 20% of the purchase. Some providers generally avoid offering a 100% buy to let mortgage, however some UK brokers will allow you to use equity from a property that you already possess. Other providers calculate your loan using a combination of your salary and the expected rental income. Buy to let mortgage interest rates are usually higher than standard UK residential mortgage rates because of the increased risk, however borrowers have the choice between both fixed rate and capped repayment schemes.

Once you've chosen an area in which to buy your property then it's worth talking to the local estate agents to check out the state of the local lettings market, what type of properties are most are most in demand (number of bedrooms etc), who your tenants are likely to be (professionals, students etc) and what rent you can reasonably expect. Make sure that the property’s in a good location close to local facilities like restaurants and shops as well as public transport links. Cheaper properties in university towns or big cities are good bets for guaranteed tenants. However if you’re depending on student tenants then don’t forget to budget for the summer months when demand will drop during the holidays, and it’s likely you will have no rental income.

Once you've finalised the deal and got the keys in your hand you'll need to decide whether you want to manage the property yourself or if you want to hand it over to a letting agent. If you're planning to let the property furnished it makes long-term sense to invest in good solid furniture which you can pick up cheaply in auctions or at house clearance sales. Your life as a landlord will also be much easier if you can minimise the amount of maintenance that might be needed, since tenants generally aren't known for their DIY enthusiasm! Similarly it's a good idea to establish a low-maintenance garden.

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