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Information About Buy To Let Mortgages



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By : Richard Ray    99 or more times read
What are the advantages of buy to let mortgage in UK?

The first big hurdle to overcome, and the most important, is finding the right property, in the right area with the right letting potential. Then you will need to finance the purchase. Fine if you have cash, but not too many people are in a position to pay up front for the purchase. In any case, paying cash is probably not the best way of going about it. There are tax benefits available as your mortgage interest can be offset against your rental income which can reduce your tax bills. Therefore, it would make sense to borrow at least some of the money.

There has been a lot of movement in ‘Buy to Let’ by mortgage providers and many more mortgages are available for prospective purchasers. However, you will need to provide a deposit, which is likely to be much higher than the deposit on the mortgage for your main residence. The more deposit you can find, the lower the interest rate on the mortgage is likely to be. The higher the risk for the mortgage lender – the higher the interest rate!

You can now find ‘Buy to Let’ mortgages which only require a deposit of around 10% whereas in the past, lenders required deposits upwards of 20%. Many lenders now offer very competitive deals with interest rates only slightly higher than the mortgage on a main residence.

You will find on offer a range of ‘Buy to Let’ mortgages which include fixed rate, discounted and tracker loans. These can all come with more flexible features too. Contrary to the current advice for main residence mortgages, many who opt for a ‘Buy to Let’ mortgage tend to choose interest only repayments. The monthly payments are cheaper. They can be offset against rental income and can be paid off by selling the property. As this is not your main residence, you do not need to pay off outstanding mortgages at the end of the term because you need to live there – the property is therefore ‘disposable’.

Always talk to your Independent Financial Advisor before taking on a ‘Buy to Let’ mortgage. You will now find Mortgage Advisors who specialise in this field and will help you find the right deal. Mortgage lenders will be more interested in the potential rental income of the property rather than your ability to pay based on your salary. They will be concerned to see that the rental income covers the mortgage repayments. Usually lender will require around 130% rental income compared to the mortgage repayment. So for example, if your mortgage repayments are £500 per month, the rental income will need to be £650 per month. This is to make sure that the mortgage can be paid with some left over to cover maintenance costs and should the property be empty for a period of time.

Always take advice from an Independent Financial Advisor before committing yourself to any financial transaction.
Richard Ray, author of this article writes for the Householders Guide where you can find up to date Real Estate News and more articles on mortgages and buy to let properties.

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