What Are Buy to Let Mortgages Used For?

Most people are familiar with residential or personal mortgages, and many may have heard the term buy to let mortgages but are unaware of what this type of finance is actually used for. A simple definition might be a mortgage product that is designed to facilitate the purchase of a property which will primarily be used as a rental property, and will not be the primary residence of the purchaser.

Buy to let mortgages are a great way to build a portfolio of properties with a very moderate initial capital investment. One particularly attractive feature of many modern buy to let mortgages is the fact that the potential income from the property rent is allowed to be factored in to the repayment calculation. This means that even people with a moderate income, can often find that they are eligible for buy to let mortgages, this is especially true if the target property is in an area which displays a vibrant rental market.

For best results, it is recommended that you seek the aid of a professional mortgage broker, they will be able to search both the property market and the lending market to firstly find you the right property, in the right area at the right price, and secondly to find you a selection of the best buy to let mortgages for your particular situation.

Buy to let mortgages seldom cover more that 80% of the value of the property to be purchased, so you will need to find a hefty deposit, think of this as the only short term investment required, even at 80% buy to let mortgages allow you to acquire properties that otherwise would have been out of your reach.

Once your mortgage is in place and you have exchanged contracts on your property, you may wish to contact a property management agency, by combining strategic purchases with good value but to let mortgages and a competent property management agency, you will be on your way to building your own property empire. The management agency will carry out all the day to day tasks involved with renting your property. They will find tenants, they will collect the rents and they will keep you advised of any problems with your property such as maintenance that needs to be carried out.

Whilst on the subject of maintenance, it is important to seek properties that are in tip top shape in order to get the best from buy to let mortgages. Ideally the property you purchase should require no additional funding from on your part, apart from the initial deposit. A good plan is to buy one property and use the surplus rent to accrue the deposit for the next property. Any maintenance required during this process will slow down the acquisition of your next property. All in all, buy to let mortgages allow people to generate significant income and procure a string of properties, building residual wealth and accruing assets.

Let Property Strategies is a specialist buy to let mortgage broker, visit their website here http://www.letpropertystrategies.co.uk/mortgage-advice.htm

Buy to let Mortgages - How To Choose The Right One

Buy to let mortgages come in all shapes and sizes.  Which type you should go for depends on all sorts of factors: your attitude to risk, your long-term investment goals (e.g.immediate income, future profit, etc.), how large a portfolio you have or aim to have, what type of properties you are interested in, etc.

• To start with, your level of risk tolerance will affect your choice of interest type – fixed or variable.   A variable interest rate can be more risky as it is out of your control, and once your interest payments start to spiral it can wipe out your profits, or even threaten your ability to pay the mortgage.  If you are a beginner, it’s a good idea to start off with a fixed rate, though even this is not completely risk free.  If the mortgage rate drops below your fixed rate you are paying more than you need, while if it goes higher you may find it hard to budget for your payments when the deal ends.

• The two main types, fixed and variable rate, include other types such as capped rate, tracker mortgages, discount mortgages, stepped mortgages etc.  Your broker will discuss with you whether any of these might be suitable for you.  Discount rate mortgages can often seem tempting, but once the discount period is over you can actually find yourself paying a higher rate.

• If you are looking for an immediate cash flow from your buy to let mortgage, you will probably be attracted to an interest-only mortgage.  This increases the chances of your rental income exceeding your outgoings.  Of course, when the mortgage term ends you will have to repay the capital.  You may be hoping to do this by selling the property at a profit, but in current market conditions this is far from being a certainty.  If you have no clear idea as to how you are going to repay the capital, you might be better off with a long-term repayment mortgage – the longer the term, the lower the rates. 

• Some lenders actually offer buy to let mortgages with a flexible rate.  These can be hard to get hold of, but it’s worth shopping around and asking your broker.  This way you could have the opportunity to take payment holidays when the property is empty.  Of course the downside is that the overall rate is higher.

As well as there being different types of mortgage, different lenders impose different conditions for buy to let mortgages.  In particular you need to check for the tie-in or lock-in period for each product – that is, how long they insist you remain with them before you can move without incurring a redemption penalty.  You also need to check arrangement fees, which in some cases can cancel out the advantages of a low interest rate.

With all these variations in buy to let mortgages, you would be well advised to use a specialist broker when you are going for your mortgage.  The broker can help you decide which type of mortgage to look for, based on your particular requirements, and will know which are the best lenders to approach for that particular type of mortgage.  In fact some of the best buy to let mortgage deals are not generally advertised and the broker will be able to locate them for you.  If you are just starting out as a buy to let investor, the last thing you want is to end up with the wrong type of mortgage – so make sure you have the best advice to make the right choice. 

Why Do You Need Buy To Let Mortgage Advice?

The way the property market is at the moment, ordinary residential homes are harder to sell and harder to buy.  For the same reasons, buy to let mortgages are more in demand.  However, if you don’t know what you’re doing, you can easily get your fingers burnt.  If you are hoping to get into the buy to let market, your first step should be to look for buy to let mortgage advice.

So why should this help you get the best buy to let mortgage for you?  The reason is that buy to let mortgage advice will look not just at the property you are thinking of buying, but at your overall financial situation and how this type of investment fits into it.

• Initially, getting the best buy to let mortgage deal will depend on how much you can raise as a deposit.  The adviser will suggest that you should be able to provide a deposit of 15-20 per cent of the purchase price.
• Different lenders have different exclusions according to the type of property being lent on.  The type of property can dictate the mortgage you can get, and many lenders have very specialised requirements.  If you obtain buy to let mortgage advice from a specialist broker, it will help you make an informed decision and should prevent you from wasting time and money by approaching the wrong lender for your requirements.
• Good buy to let mortgage advice will look at your level of risk tolerance.  No buy to let investment is entirely risk free, as there are so many factors outside your control, such as interest rates and market fluctuations.  Unexpected rises in interest rates can have a major impact on your business and could potentially wipe out your profits.  However, the type of area, the type of property and the type of target tenant you choose can all affect the level of risk.  The adviser will discuss with you what type of mortgage – e.g. fixed rate or variable rate – will best suit the level of risk you are willing to take.
• Really good buy to let mortgage advice will also take into account your life situation and your personal aspirations.  The adviser will discuss your target age for retirement, and whether you wish your investments to have paid out by then, or whether you want them to provide income in retirement.  The adviser can also help you be clear about whether you are looking for an immediate cash flow, or whether you want investments that will pay off in the long term.  This will influence your choice of mortgage, whether it’s an interest-only mortgage, a long-term repayment mortgage, etc.

It’s difficult to take an objective view of your own life.  But looking at how your buy to let investment is going to fit in with your overall goals is a far better idea than just grabbing a buy to let mortgage because you have spotted a property that looks attractive.  A good specialist broker can provide buy to let mortgage advice that will not only save you time and money, but enhance your life chances too.�

Stress busting ideas for concerned landlords

When things are looking less certain it becomes all the more important for people with buy to let mortgages to make sure their properties are working perfectly. For those people coming to the end of a cheap fixed rate deal, your finances may start looking a little stretched. With the financial markets looking uncertain, many banks have chosen to stop their most appealing deals and are not pushing for new customers. Below are some suggestions to beat the credit crunch.

Insurance

Anyone that has uses buy to let mortgages for their properties will have to find the appropriate insurance. A quick glance at any insurance website will prove that the cost of insurance varies a great deal depending on which company you chose. You can save up to two hundred pounds a year so it’s definitely worth looking at the options as your current insurance broker may not be able to give you the best price. If you find a better deal you can also approach your current insurer with the quote you have been given to see if they can match the price.

Interest free mortgages

If you discuss your concerns with a buy to let mortgage broker you may be able to convert your buy to let mortgage to one that is interest only. This change will not only lower the monthly cost of your mortgage but will allow you to get extra tax relief on the interest you have paid. Talk to your accountant who can advise you on ways to offset the interest you pay against your rental income.

Rent

Many landlords have commented on the increased demand they have for their properties. More people are renting and many letting agents have increased their rent by up to ten percent on all their properties. This increase in rent will often help you when you apply for new buy to let mortgages and will definitely ease the other running costs you have. Many landlords report that they have not increased their rent for many years and as a result, are losing our on valuable income.

Environmentally friendly

From the beginning of October the government requires that all landlords issue an EPC certificate to any new tenants. These certificates will let the tenant know how energy efficient the property is. For landlords concerned about the risk of an empty property and still haying to pay their buy to let mortgages it is worth considering increasing the overall standard of their EPC rating. With the rising cost of fuel many tenants will look for properties that are energy efficient. You can also get some tax breaks on up to £1,500 spent on improving things like loft and floor insulation.

What is the Purpose of Buy to Let Mortgages?

Put simply, buy to let mortgages are a special type of mortgage that is geared towards a buyer who is intending to purchase a property and then make it available for rental. Buy to let mortgages have different terms to a conventional mortgage.

A significant difference between buy to let mortgages and a conventional mortgage is the fact that the mortgage lender will allow the borrower to incorporate the projected rental income as part of the overall income level for consideration when applying for the mortgage. Interest rates for buy to let mortgages are slightly above that of a normal mortgage, to offset the potential risk of a property sitting empty and the owner defaulting on the mortgage. Modern buy to let mortgages are attractively priced, and are no longer considered the specialist form of financing they once were.

Over the last ten years, buy to let mortgages have become increasingly popular, as they offer a particularly good way of accruing capital assets with minimal funds. Typically buy to let mortgages are available in terms of 5 to 45 years. Down payments can be as low as 20%, making buy to let mortgages a great way of investing money, even if you only have access to limited funds. Of course, any property you purchase in this fashion is liable to the same variation in value as any normally purchased property should the market slump.

In order for you to get the best from whichever of the buy to let mortgages you choose, you are advised to make sure that the property you are intending to buy will require as little maintenance as possible, and that you have plans in place to ensure the property is rented at all times. A great way to manage a property that has been purchased with one of the buy to let mortgages is to turn it over to a property management company, this effectively puts your property into fire and forget mode, you simply make the mortgage payments each month and the letting agency will handle the rest.

If you plan your investments, buy to let mortgages are a great way to accumulate capital wealth, quite often the monthly rent received will completely offset the mortgage repayments and completely cover the property management costs, there may even be a little left over as pure profit. If you consider that buy to let mortgages allow you to procure new properties with very little capital investment, it becomes clear to see why they have become so popular in recent years.

Buy to let mortgages are subtly different from traditional mortgages and it is advised that you seek the advice of a professional buy to let mortgage broker, they will be able to advise you which type of property are best purchased with buy to let mortgages, and how you can minimise the risk of your property becoming a problem instead of an asset.

Buy to Let Mortgages

The buy to let market in the UK is very popular; figures show that in 2006, 10% of all mortgages taken out in the UK were buy to let mortgages. Buy to let mortgages are designed and used to help people finance the purchase of a property with the view of letting it out to tenants and charging rent.

The buy to let mortgage market has risen sharply in popularity in response to the increased number of people getting into the business to purchasing a property to let it out.  High financial gains in the long run can be yielded from the property letting industry and the prospect of becoming a landlord owning numerous buy to let properties gets most people excited.  Buy to let mortgages help these people realise their dreams and get onto the property letting ladder and securing their future financial security.

There are more restrictions and criteria’s involved in buy to let mortgages compared to residential mortgages.  The decision to grant a buy to let mortgage or not is based largely upon the potential rental income from the property, and not solely based on the borrower’s personal income or annual salary.  The reason for this is so that the lender has reassurances regarding the repayment of the mortgage and they favour properties which have the potential to grow in value.

Before purchasing a property for the purpose of letting, it is important to carry out extensive research such as the likelihood of the property being successfully rented, people can be advised regarding this matter by local estate agents and experts.  A survey of the property will also needed to be carried out to see if the property requires any extensive repair which could eat into the profits.  Also it is essential to find out if it is possible for the house to be granted a mortgage which is a decision dependant on numerous factors.

There is no doubting the possibilities of the buy to let market as a profitable industry, a buy to let mortgage allows the average person to purchase a house and hopefully earn long term profits and secure their financial future, the first property could also lead onto much bigger things.

Let Property Strategies Limited are a specialist buy to let mortgage broker. Visit their website at http://www.letpropertystrategies.co.uk/mortgage-advice.htm

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