Buy To Let Mortgages

A popular misconception is that buy to let mortgages are expensive and restrictive. However, these days interest rates on buy to let mortgages are generally not significantly higher than those on standard residential mortgages.

For example, a potential buy to let investor can now expect to choose either a fixed or variable rate mortgage, whereby their rate would be approximately 0% to 1% above the current Bank of England base rate, depending on the size of their deposit. This is now much more in line with main residence mortgage rates.

Buy to let investors also have a choice between interest only and repayment mortgages, with the greater amount choosing the first option for tax efficient reasons. But buy to let borrowers do have to jump through some extra hoops to satisfy mortgage lenders. For starters, buy to let mortgage lenders base their decisions on whether or not to approve a loan on the likely rental income from the property and not the applicants' income.

In order to secure finance, rental income needs to be between 100% and 130% of the monthly mortgage interest payments and provide an annual yield of more than 8% of the mortgage. The applicant should also ideally have a minimum 15% deposit and not be a first time buyer.

With the housing market showing signs of losing some of its appeal, anyone considering buy to let needs to be a shrewd operator and do their research. It is more vital than ever that a would-be buy to let investor pick the right location for their investment. Don't pay too much attention to promises of high rental yields by letting agents. It is a good idea to contact them first as a potential tenant, to help get to the facts about local market conditions.

A little local knowledge can go a long way in buy to let investing. The most successful buy to let investors purchase property close to where they live and always get a full survey done of their potential purchase, buy to let is a huge investment and not to be taken lightly.

By using an online letting or estate agent, you may also be able to negotiate on fees.