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UK Mortgages & Loans -> Buy-to-Let Mortgage

If an individual is considering to purchase a house or flat in order to rent it out, so that it can provide them with an extra income as well as a long term investment, then there are certain mortgages which are designed specifically for this purpose. These forms of mortgages are called buy to let mortgages.

A few years ago these buy to let mortgages would cost the borrower a higher rate of interest.They would need a larger deposit and would expect to have a large penalty fee for changing their mortgage.

However, over the years, the buy to let mortgage market has considerably changed. These mortgages have considerably changed to become a lot more consumer friendly. There is now a great scope for expansion with these types of mortgage.

A lot of buy to let mortgage lenders now offer a maximum loan amount of 85% which means that the borrower will need to supply at least a deposit amount of 15% against their investment property. This buy to let mortgage industry has become very competitive because it has newer products being introduced on a very regular basis.

A few buy to let mortgage brokers could charge the borrower a brokerage fee of around 2% for arranging the buy to let finance for them, although if they have the ability of securing an exclusive product for them, it would be highly beneficial to the borrowers’ cash-flow as a landlord. As well as this, if the broker is able to reach a formal mortgage offer stage with a short space of time, it could result in the borrower being able to secure their investment property at a very competitive price if they have the capability of informing the vendor that they are able to have the deal concluded within a few weeks.

The amount of money that a borrower is able to borrow for their buy to let property will normally be calculated differently to that of a normal mortgage. Various lenders and numerous products will have different criteria for calculating the maximum loan amounts available to the borrower. A few will base their calculations on how much the borrower earns, whilst others will base it on the rental income amount that the borrower will receive from the investment property. A few lenders will base it on a combination of the two.

The buy to let mortgage market was valued at around £21.8 billion in 2004. This accounted for around 38.2 % of the commercial market within the same year. The market for the buy to let mortgages has grown a lot more than any other market overall. These mortgages are a constructive effort from The Association of Residential Letting Agents (ARLA) in order to encourage an increase within the private rented sector.

These mortgages are a specialised creation for the special mortgage product. Though, there is not much difference between these mortgages and the other mortgage types. If the borrower is aware of the numerous points of a buy to let mortgage, then there is no reason why they cannot be successful in their investment. Each buy to let mortgage will use the normal mortgage guidelines. The mortgage lender will look at the borrowers’ credit worthiness, the value of their property and the deposit amount before they will agree to the borrower having a buy to let mortgage.

These buy to let mortgages have become very popular over the years. They have low interest rates, which have added to their attraction. The rental income is also a more reliable form of income than that of any other forms of investment.