Buy to let mortgages
Where should I look for buy to let mortgages?
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With confidence in the stock market and pensions industry at its lowest ebb for many years, more and more people are transferring their faith into property. This "safe as houses" approach to financial planning has therefore meant a consequent growth in the buy to let mortgage market.
The trend towards buying property to rent comes as industry forecasts predict expansion in the rental sector. One of the main drivers for this expansion is escalating house prices, which makes it increasingly difficult for first time buyers to get their foot on the property ladder.
Against this background is the historic fact that property values, in the long term, increase and are generally a far less riskier proposition than investing in stocks and shares.
Most people require a mortgage to break into property rental. Normal mortgages, however, cannot be used to finance this type of mortgage. Instead, a special buy to let mortgage is required.
To serve this niche, greater numbers of big name lenders are getting in on the act, so there's now a far greater choice of buy to let mortgages. And some great deals can found right here on this site.
Should you be contemplating buying property to let, there are a number of issues to weigh up.
Don't expect to obtain a 100 per cent mortgage, the maximum that's likely to be on offer is 80 per cent. Buy to let mortgages are regarded by lenders as higher risk since the borrower does not intend living in the property. The inherent risk is that repayment of the mortgage is subject to the vagaries of tenants and market forces within the rental and property market.
You also have to ensure that the rent payments received will cover the cost of the mortgage. Most lenders recommend that the rent should be fixed as a minimum at 150 per cent of the mortgage repayment. It's therefore vital to get the sums correct from the outset or the rental property could turn into a wallet-emptying liability.
Check with your local estate agent, they will be able to provide a good picture of the types of property being rented in your area and the rent levels they are attracting.
An independent financial advisor or independent mortgage advisor will assist you on the cost effectiveness of your proposal and with selecting the right buy to let mortgage. Before contacting them, have a budget for how much you can afford and an idea of the type of rental property and general location you have in mind.
Doing your homework in advance will help ensure you gain the optimum benefit from your venture into property and minimise the stress and worry about things going pear shaped.
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