Why Buy to Let Mortgages are Popular
Buy to Let mortgages are very popular in the UK. Reasons for their growing popularity are:
Property is a great longer-term investment, especially as stock markets are volatile.
Interest rates are low, so buy to let mortgages offer an attractive alternative investment.
With the overall UK population rising, a high divorce rate plus growing student numbers, there is plenty of demand for rental accommodation.
Mortgage lenders are offering competitive, specifically-designed, accessible buy to let mortgages to make life easy for the landlord.
Buy to Let Mortgage Types
In the past, the only type of buy to let mortgages available were variable rate deals. However, nowadays there is a whole range of buy to let mortgages, from fixed rates and discounts to trackers and flexible rate mortgages.
Buy to let mortgage lenders will usually insist that you have a deposit of 15 per cent, so the size of your deposit will help determine the amount you can borrow. Lenders will usually insist that the rent the property will command covers 125 per cent of your mortgage payments (although some will accept 100%).
This protects both you and the lender against rental voids - periods when the property is un-tenanted.
Unlike residential borrowers, most buy to let investors opt for interest-only mortgages, simply paying off the interest owed to the lender, but not the outstanding capital. This is repaid on the sale of the property.
Buy to Let Investors
There are two types of buy to let investor in the UK: the professional landlord and the so-called amateur landlord. A 'professional' investor may have a portfolio of anything from three to hundreds of properties, while the 'amateur' is more likely to have just one or two.
Whichever type of buy to let investor you are, the basic principles remain the same: you must buy the right property at the outset, and get the right finance for it. And you must be aware of the same things: your legal responsibilities as a landlord, and how your investment affects your tax position.
There are plenty of lenders in the market to cater for your needs. At present, buy to let mortgages are only available through intermediaries (mortgage brokers), although some high street lenders have talked about offering them directly to borrowers.
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