What Is A Buy To Let Mortgage?

A buy to let mortgage is a mortgage that loans you the money to buy a house to let to a tenant. Essentially a buy to let mortgage will enable to landlord to buy a property which will yield enough rent to pay the mortgage and leave a small monthly profit. After keeping the property for a number of years, the house can then be sold for a profit.

People wishing to buy a property to let should consider it as a long term investment, because although short term gains can be made it is usually by keeping the property for a longer time that yields the best rewards.

Why Buy To Let?

Why would you want a buy to let mortgage and what benefits are there to be had from owning a buy to let property at all?

• Owning a property as a long term investment is a reasonably safe way of reaping long term rewards.
• Whilst interest rates are low the buy to let mortgages offer investors an alternative investment.
• there is more competition now, so you will get some better deals from lenders.
• With house prices rocketing, the prospect of mortgages, especially for first time buyers, is daunting if even possible. Couple this with an increase in divorce,, UK population and students, and renting out a house or two may show real investment potential.

What Types Of Buy To Let Mortgages Are There?

Buy to let mortgages are not just limited to variable rate mortgages anymore. You will find a wide cross section of buy to let mortgages including:

• Fixed rate buy to let mortgages - these may offer the comfort of knowing how much you will be paying each month, which could help you plan your finances better. However, there are usually some sort of early redemption clauses.
• Variable rate buy to let mortgages - these offer more flexibility than fixed rate mortgages, they are also a benefit if the interest rates fall.
• Capped rate buy to let mortgages - these are variable rate buy to let mortgages that are capped at a set percentage. Below this percentage the mortgage behaves like a variable rate buy to let mortgage, above it and it behaves like a fixed rate buy to let mortgage fixed at the agreed percentage.
• Minimum Status Buy To Let Mortgages - these are for people stretching to buy a rental property. The lender will give you a buy to let mortgage if you are not able to meet all the criteria of the standard rate variable mortgage. As this is a bigger risk to the lender you may well find that you will be penalised with higher interest rates or other compensatory charges.
• Non Resident buy to let mortgages - these allow UK ex pats or UK non nationals to invest in the UK property market.
• Limited Company buy to let mortgages - these may be necessary when the property investor has decided to become a limited company for whatever reason. The loan must then be taken out by the company. Remember though, just because the mortgage is taken out by the company it may not mean that the directors are safe in the event of default of payment.

Other types of buy to let mortgage may exist or are being added all the time, so do your research and remember that if you are unsure about buy to let mortgages or buy to let remortgages then consult an independent financial advisor.