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Buying to let
A buy-to let mortgage is a
home loan to buy
an investment property. A lender will not offer a standard mortgage on a
property that you don’t intend to live in, so if you are buying a second
property you will have to take out this kind of loan. In many ways these
mortgages are the same as standard deals, and the application process and costs
involved will be similar.
The rates on buy-to-let deals tend to be higher than those on residential
mortgages, but the margin is falling. And the choice of
mortgages is
growing - you now get the same choice of discount, fixed rates and trackers as
is available in the standard mortgage market. You will, however, need a
substantial deposit, as most lenders limit borrowing to 80 per cent loan to
value (LTV).
Many lenders are willing to base the amount they will lend purely on the
anticipated rental income, so you don’t need a huge salary to get involved in
buy to let. The lender will usually insist that the expected rental income
exceeds your mortgage repayment by a certain percentage - usually it will expect
a rental income of 130 per cent of your monthly mortgage payments. It may ask
for a statement of the expected income from a letting agent, or rely on the
valuer to provide an estimate when he surveys the property.
Some schemes allow you to build up a portfolio of properties by remortgaging one
rental property to raise a deposit for the next. If you are planning to become a
serious investor, it may be worth asking about this at the outset. Before you
choose a lender, make sure it offers the scope you need. Most lenders will
restrict the number of properties in a portfolio and the total amount you can
borrow.
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