Residential Buy to Let Mortgage
If you are thinking about buying a property to rent out then you may need a special type of mortgage called a “buy-to let” mortgage. It is a special mortgage in that the mortgage lender will allow you to rent the property to tenants instead of insisting that you live in the property yourself.
Unlike a residential mortgage whereby the loan amount is calculated based on your income and expenditure, a buy-to-let mortgage loan is calculated based on reaching a certain rental yield. The realistic achievable rent must be between 125% and 130% of the mortgage amount. There maybe additional lending criteria to consider and your mortgage adviser will be able to guide you further.
Expect a buy-to-let mortgage to be a little more expensive in terms of interest rate and also the arrangement fees lenders charge when taking out a mortgage.
As far as deposits are concerned expect to place a 25% deposit down on the property as most mortgage lenders will not lend above 75% loan to value. If you are purchasing a property for £185,000 this would mean a deposit of £46,250.
Some lenders will allow you to put down less deposit.
As with residential mortgages you can get fixed rates for set periods of time as well as variable rates.
Both Interest Only Mortgage and Repayment mortgages are available with Buy to let mortgages and your choice will be based on whether you are a professional landlord or someone wanting to invest for retirement.
Certainly there is a possibility to make profit from the property if house prices continue to rise as well as rental profit.
There is a current surge in buy to let mortgage applications even with the Chancellor of the Exchequers taxation change announcements.
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