11:30 31 July 2013
A buy to let mortgage is the same as a residential mortgage, it is a loan secured on a property. However, repayments typically come from the rental income rather than from personal income. The rent should meet the monthly mortgage payments otherwise, the borrower’s finances may become strained.
People who are thinking about taking out a buy to let mortgage must provide say a 20per cent deposit, and must meet the lender’s minimum personal income requirement. This varies from lender to lender.
The borrower must also give proof that rental income is enough to pay for the mortgage with allowances for periods of absence. The monthly rent should be equivalent to say around 125per cent of the monthly mortgage interest payments.
Eligible individuals will be given options to take fixed, tracker, or variable mortgage. However, keep in mind that compared to regular residential mortgage, you should expect to pay more as the rates for buy to let mortgage are typically higher.
A buy to let property offers several benefits for the borrowers. This is an investment that can bring money to your pockets. Also, if the price of property increases, you will benefit from selling the property at a later date.