Tuesday, October 9, 2012

The Scoop on Buy To Let Mortgages

Property market
Property market (Photo credit: Alan Cleaver)
Many individuals today know property investment can be a very profitable proposition, and landlords all over the UK are making large sums of money, both in terms of rental income and rising equity value in their property. 

For many interested in buying property to rent out there are special mortgage programs called “buy to let mortgages” available. When looking around for a buy to let mortgages keep in mind that you should thoroughly analyze these mortgages as you would any other mortgage, since you want locate a mortgage lender that is offering very competitive interest rates. 

A good place to start comparing buy to let mortgages is the Internet. You can do your research from the comfort of your home and you have flexibility and convenience in your favor. Researching these mortgages through the Internet will give you the opportunity to familiarize yourself with the industry before making any financial commitments. 

In doing your research you will see that the interest rates on these mortgages are slightly higher than on traditional mortgages, even though the difference in rates usually isn't that significant. You will probably have to put down a larger deposit on a buy to let mortgage, with some lenders requesting as much as 25% of the property value as down payment, so you may need to have quite of bit of money on hand to get your mortgage. 

Remember, mortgage brokers are well qualified and trained professionally. Therefore, they are well-versed on the way buy to let mortgages function, and they have access to all kinds of mortgage programs in the UK. You will probably pay a fee to the broker for his services, but this may be a good deal if they can find for you a mortgage at a good interest rate. 

Just as in any type of mortgage, the requirements for eligibility will vary based on many factors including your financial status, your credit history and your rating. When lenders decide how much money you are eligible to borrow for this type of mortgage, some lenders will consider regular income, as well as any rental income expected from the property, while other lenders may only consider the potential rental income. From your perspective, be sure to confirm what your monthly repayments will be based on the mortgage amount and the amount of your down payment. Also, be sure to check the fine print for any details, any obscure fees or setup costs, so that you will know exactly what you are required to pay. 

As part of your mortgage you will be required to purchase insurance for the building and its contents, particularly if you are offering a remodeled property. Just make sure your insurance will cover fire, vandalism, water damage, or any type of loss you can contemplate. You want to be sure the building is covered for any catastrophe.
Since buy to let mortgages have increased in popularity in recent years, numbers of individuals are getting on board. It has become a very competitive market with lenders offering a wide range of deals to tempt potential property owners, so it is essential not to go for the first buy to let mortgage that is presented to you because there might be a cheaper one around the corner.

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