Buy to let mortgages

Monday, November 12, 2007

A buy to let mortgage is designed to allow individuals to buy property for investment purposes. These mortgages are not regulated by the Financial Services Authority.

They have been a very popular type of mortgage in previous years due to the continuing rise in property prices and the shortage of property for rent.

The rental income and the possible capital gain that can be achieved when the property is sold presents an interesting investment opportunity.

Buy to let mortgages are a greater risk to a lender as there is no guarantee that the property will be permanently tenanted and therefore could stand empty with no rent coming in. Also the borrower could treat the commitment less seriously than if the property was there own home. Lastly the value and saleability of the property could be affected if it is badly treated by the tenants.

Lenders usually offset this risk by charging a higher interest rate, however with demand for these products, interest rates still remain competitive.

The buy to let mortgage is not usually based on income multiples. Instead the lender is more interested in the rental income on the propertyand would like the rental income to be around 125% of the monthly mortgage payment.

The lender will also want a suitable tenancy agreement in place so it is not prevented from obtaining a possession order in the event of a default.

Solution Mortgages can help if you are considering a buy to let mortgage regardless of your credit history. Feel free to call 0845 123 1260 or apply on-line at www.solution-mortgages.co.uk