27th Sep 2008
advice on buy to lets
When an established individual wishes to take out a mortgage to buy another property or home, they may be interested in a Buy to Let mortgage solution. Although these types of loans are not regulated by the Financial Services Authority, many banks and lending institutions allow this type of mortgage to be set up.
Buy to Let Mortgages are for properties that will be let to tenants by the borrower. The loan amount for the Buy to Let will be determined by the projected rental income instead of salary income. Since the buy to let mortgages are not regulated by the Financial Services Authority, they are not protected under the Financial Services Compensation Scheme.
A borrower will simply apply for a buy to let mortgage, they will then purchase a property and prepare it to be let. The lender will determine the final buy to let mortgage loan and repayment terms based on potential projected income from the home. A buy to let mortgage may be the best solution for an individual who wishes to buy a second home and make some money on the side once the mortgage is paid off. However much money the house will be let for will help determine the total amount that will be loaned to the borrower.
Lenders will determine the value of your income and may offer you some options on loan amounts. Some will let you borrow 3 times salary and half the income of the rental property. Others may let you borrow less, based on other existing loan commitments you may have with other lenders.
Having tenants in the house right away would help make it possible for the repayment terms to be more manageable. Even if there are no current tenants in the home, the borrower will still be required to send repayments to the lending institution. Landlords with an inadequate income may suffer some setbacks if they don’t have a tenant present to offer a rent income.
There is always the threat of the home market value of dropping. Lenders benefit by maintaining the loan amount regardless of the market value. Suffering on the borrower’s part is by owing more on the true value of the home over time. If the value of the home market raises during the mortgage term, the borrower may pay it off more quickly, making this a profitable risk.
Closing Comments
A buy to let mortgage may allow an individual to make a great investment on a second home. An established buyer will probably have little or no problems making repayments, leaving them with a profitable estate in the end.
Learn more about Top 10 Lenders for Buy to Let and Buy to Let Limited Company Mortgage UK.
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