Buy to let mortgages are a fantastic option for potential landlords looking to capitalize on rising rental returns and invest in the next real estate boom. Unlike regular mortgages buy to let mortgage is designed specifically for landlords who will lot out the property to tenants. The amount you can borrow varies, but as a general guide you can expect at a minimum to be able to borrow up to 80% of the monthly income receipts you expect to receive.
Because there are a number of different types of lenders willing to enter into a buy to let mortgage you'll want to shop around. Be warned however, if you like pounding the pavement and having face-to-face meetings with potential lenders you're going to miss out on being able to compare the best rates. Many lenders now work almost exclusively online or through agents so you won't find them by knocking on doors. You'll have to use the internet and the telephone if you want to get the best rates, but it's worth it if you consider you are likely to save yourself a lot over the course of the mortgage period.
Here are a few of the best buy to let mortgages on the internet:
- Principality BS
- Nottingham BS
- Cheltenham & Glocester
- Bank of China (UK)
- Saffron BS
- Coventry BS
- The Mortgage Works
- Leeds BS
- Post Office
One of the most common questions borrowers ask when considering a buy to let mortgage is whether to fix their interest rate for the convenience of having regular reliable repayments. After all, when you're a landlord you know what your rental income is going to be from your property, so shouldn't you also want to know what your outgoings will be? If your interest rate fluctuates then you might find difficulty in the future if the rate rises. Similarly however, and the risk of a fixed interest rate is that your rate could decrease, leaving you with higher repayments than if you had a variable rate.
Of course it is a matter of opinion, but a professional opinion as to the future of interest rates is a good idea, particularly if your buy to let mortgage is going to be substantial.
The difference between a few interest rate points on a large mortgage can be substantial and could result in losses on your rental property investment.
Buy to Let Mortgage Lending Criteria
Before you will be able to apply for a buy to let mortgage there are a number of common lending criteria that you should be able to satisfy. Getting a buy to let mortgage isn't as easy as a regular mortgage for a house you are intending to live in.
The following are some of the common restrictions on buy to let mortgages:
- You must be at least 25 years old at the start of the term and must not be over 75 when the mortgage term expires
- You must have previously had a mortgage
- The property must be inspected and found to be in good condition
- You must exceed a minimum income requirement that is often higher than a regular mortgage
- You must show evidence the property is going to be used for rental
You should also be aware that your property may be repossessed if you do not meet your monthly repayments. Buy to let mortgages are not covered by the Financial Services Authority.
