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Buy to Let Mortgage
Many people in the UK today are looking at property
as an investment choice, moving away from the traditional bonds and shares.
A property can be an excellent investment, providing a good monthly return
and increasing in capital value at the same time, getting the right property
is the key to seeing a return on your investment.
With the rise in popularity of choosing housing as a means of investment,
lenders began to offer specific buy to let mortgages, which are designed
to be used to fund the purchase of a property with the purpose of letting
it out to tenants. The need for a buy to let mortgage is because most
regular mortgages forbid the private sub-letting of the property against
which they are secured.
Although a buy to let mortgage is very similar in many ways to a standard
mortgage, the lending criteria is quite different. When applying for a
standard mortgage the lender will look at your income to asses whether
you can afford the repayments, with a buy to let mortgage they asses the
rental potential of the property to determine this. In general the lender
will require that the rental amount possible be between 100-150% of the
monthly mortgage repayment, to be sure that you can afford the mortgage
as well as the ancillary costs of running a rented property.
The amount that you will be able to borrow will vary depending on the
lender and your circumstances, but it will generally be between 75% and
85% of the value of the property – meaning that you will need to
provide a deposit of 15-25%. This can make the start up costs of a buy
to let property high, but provided you can raise the money for the deposit
and other costs, and have a property with good rental potential in a good
area you should see a return on your investment in the long term.
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