Buy To Let Mortgages

Because of the continuing trend to invest in property, buy to let mortgages are commonplace in the UK financial markets. Almost everyone can now access a buy to let mortgage ... and it's almost as simple as applying for a residential mortgage, even for first-time landlords.

Having said that, with credit being tight at the moment, buy to let mortgage lenders have restricted their lending criteria, making it more complicated to get a buy to let mortgage than it was before 2008.

As with a mortgage on your home, investment property lenders are mainly concerned with the issue of your ability to repay the buy to let mortgage. Each lender imposes their own specific conditions on whether they will lend, so it's a good idea to get mortgage advice to see what buy to let options are available to you.

Some lenders require you to have a residential mortgage before they will give you a buy to let mortgage. Others won't lend on certain types of property, and there may even be a minimum income requirement of £25,000 depending on the lender.

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Buy To Let Mortgages - Rental Cover

A key factor affecting your ability to obtain a buy to let mortgage is rental cover. This is the extent to which the expected rental income from the rental property exceeds the interest payments on the mortgage. Typically lenders want 125% rental cover eg if your monthly rental income is £500, the monthly mortgage payment cannot be more than £400.

Again not all lenders use the same calculation ... some want 135% cover, others 100%, others may even allow a combination of other income and the rental income.

When calculating the rental cover, remember that most buy to let mortgages are interest only mortgages, so your rental income should be 125% of the monthly interest payment.

The providers of buy to let mortgages may also impose conditions regarding the management of a buy to let property. For example they may state that the property should not be let to people whose rent is paid by the local housing benefit office. They would also insist that the proprty is let on an Assured Shorthold Tenancy arrangement, to avoid creating a sitting tenant.

Visit The Mortgage Advice Team to get an online quote and find out what buy to let mortgage options are available to you.

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Despite the current unprecedented low interest rates, banks are charging relatively high interest rates for new buy to let mortgages. The interest rate offered is greatly infuenced by the loan to value.

In other words, the smaller the deposit you invest in the property, the higher the interest rate. A few years ago 85% LTV was the norm. Now very few lenders will grant a buy to let mortgage at 85% loan to value ... and if they do the fees are much higher than they were in the past eg 2.5% arrangement fee and 5.99% interest rate.

Put in a 25% deposit or more and you get the best interest rates - currently one of the cheapest is less than 3% - plus the arrangement fees may be less onerous.

Visit The Mortgage Advice Team to find out what buy to let mortgage options are available to you.

 Click to compare buy to let mortgage deals.

Property investment comes with it's own risks, but the benefits are the ability to generate income ... as well as the profit from capital growth when the property increases in value.

Property prices can go down as well as up, and should be viewed as a long term investment. Current property prices are about 20-25% lower than peak prices of 2007/8 so many investors will have seen their capital value fall.

For new investors who are looking for income, this is good news ... as they can buy cheaper than a few years ago and property income has risen.

Some investors invest in property for long term capital growth. They typically don't need the rental income to live on, and buy more expensive properties with low yields that just cover themselves. They tend to instruct professional letting agents manage their properties for them. These investors can find the going tough when interest rates rise and they have insufficient rental income to cover their costs. But they really benefit in terms of capital growth when property prices are on the up.

Investors who want an income tend to buy low value properties with a high yield. They may let to students or sharers and manage the property themselves to maximise income. They can usually survive any rises in interest rates. However, they will not gain as much in terms of capital growth.

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IMPORTANT NOTE: Fast-Track Property is not providing financial advice regulated by the Financial Services Authority. All information has been obtained solely from our own experience of purchasing property. It is provided as general information only and is not intended as investment advice. Before making any decisions based on the information provided, you should consult with either the specialist advisors we introduce to you, or take independent legal and financial advice. .  The price and value of any property and income can decrease as well as increase, and the return on the Property may be less than that originally invested.