A mortgage is basically a loan secured upon an asset. Most mortgages are loans granted to home buyers to buy a house or flat and in most cases the mortgage is the single largest financial liability that most will take on during their lives.
A Buy to Let mortgage is a loan which, as the name suggests, is lent to the buyer of a residential property for the purposes of investment rather than personal occupation. Both loans are used to buy houses or flats but the Buy to Let mortgage is different in some subtle but important ways.
Buying to let is a popular and potentially lucrative way to invest your cash. It is potentially lucrative because it offers you several benefits over the simple investment bond or building society account. There is potential for capital growth and rental income.
Because a Buy to Let mortgage is a loan on a property investment, the lender is likely to want to take into account several additional factors to those expected when buying your home for personal occupation. A lender will want to be sure that if you borrow from them, you are earning enough to pay the mortgage payments.
With a Buy to Let mortgage the mortgage adviser will look at your own income and expenses, but also at the rental income the investment is likely to produce. They will have criteria including Loan to Value, which we have explained elsewhere on our blog, but they are likely to also set maximum ratios of monthly rent vs monthly mortgage repayment. They will look at net rental income (after management costs, Buy to Let House Insurance, etc) and they will want to make sure that if interest rates rise, you are still able to pay the mortgage even if rents remain static.
Of course, the lender is keen to lend money. That is their business. However, they need their money back too and it’s not in the lender’s (the mortgagee’s) interest to hold a lot of risky loans with a poor return. This is why they have other lending criteria for Buy to Let mortgages and in many cases this is why borrowing for your own home is cheaper than borrowing more money for a second property investment. Lender’s need to know what you are buying - and why they are lending you money before they quote you terms.
For more information or to borrow on the best terms contact us for an informal and friendly chat.
Call 01628 507477 or email us here: team@mortgagerequired.com for more information.
Related Blog post: Why do People Buy to Let?
Download our Free First Time Buyers Guide
Recent posts
Getting on the property ladder is a big milestone in life, and is not something to take lightly. There are several things to take into consideration such as saving up for a deposit, finding your dream home, and finding the best mortgage product to suit you. Here we look at UK first time buyer statistics.
Can I get a mortgage without a deposit?
12 days ago
If you are struggling to get over the hurdle of saving enough deposit due to being in a rental property, but wish to purchase your own home, you may be able to with a 100% mortgage. You will need to meet certain requirements and be financially stable.
Reasons to Remortgage your Home
19 Mar 2024
If you are looking at remortgaging your property but you are unsure whether it’s the right decision, we have listed five reasons why it might be for you.
Debt Awareness Week | Consolidating Debts
12 Mar 2024
As the cost-of-living crisis continues, many people across the UK are struggling financially, many of whom are finding it hard to get debt-free.
According to research by StepChange, there are five common reasons people don’t seek help and advice with debt concerns.
Friyay Rate Reviews
6 Feb 2024
Every Friday our experts search the market for the latest rates from every lender saving our clients some serious £'s!
Looking to Extend?
2 Feb 2024
Are you looking to extend your property? There are many benefits to adding an extension to your existing home, here are a few.
Why should you consider Equity Release?
30 Jan 2024
Put simply, Equity Release is where you can release equity (money) tied up in your home for any purpose you like. In this short article, we share some reasons why you may want to consider Equity Release.
How to cut your food shopping bill
17 Jan 2024
The team at Mortgage Required may not be able to lower the prices in your local supermarket, but we have come up with a list of tips to help you lower your food shopping bill.
More information
Trusted by
