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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 buy to let 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 and take some
buy to let advice from a specialist
buy to let broker. 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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This article
has appeared in Mortgage Magazine which is available in all good newsagents.
Copyright MSM International
Ltd
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