Buy to Let Mortgages

This is a mortgage which is taken out on a property which you intend to rent out

 

Would suit someone who:

 

• Prefer to invest in something more concrete than stock or shares, for instance.

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• Are prepared to accept the amount of time and energy property management can take up against the potential return.

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• Understand, and are willing to take the risks involved. It’s true, you may not earn a profit, so prepare yourself for such eventualities.

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• Appreciate the further risks and repercussions involved with borrowing money.

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• Acknowledge that property prices can go up, as well as down.

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• Have a willingness to potentially tie your money up for long periods of time.

 

Points to be aware of:

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SOME FORMS OF BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY

 

• The size of the deposit required is higher than to purchase a residential home for you, usually around 25% of the purchase price.

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• The majority of lenders expect you to already own your own home that you live in, however this is not true in all cases.

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• Some lenders require you to have a minimum income of around £20,000.

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• The lender will require a valuation not just on the sale valuation of the property, but also on the expected rental income.  The amount borrowed is determined by the rental income.

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• The interest rates tend to be higher and the fees more expensive than standard mortgages.

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• These types of mortgage are usually offered on an interest-only basis. This means your monthly payments will only cover the interest on your mortgage. The debt you have borrowed will not reduce and you will need to pay the capital borrowed in full, at the end of the term. This could be done by selling the property.

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• You may have to pay a higher rate stamp duty for a second property, which is not your main home.

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• You could use a limited company to purchase buy to let properties.