Buy to Let Mortgages
UK - USA - Canada

A buy-to-let mortgage is one that is obtained to purchase a property that the owner intends to let out to tenants. Buy-to-let mortgages have grown in popularity over the last few years with investors looking for an alternative form of investment to the stock market or as an alternative, or addition, to income provided by the traditional pension scheme.

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Introduction

Buy-to-let mortgage offers feature a number of options that are common among all types of mortgage. The most important factor is the interest rate of the mortgage, as it determines the total sum payable by you over the total term of the mortgage. Interest rates can be fixed, variable, or capped. A fixed interest rate is one that does not change at all throughout the term of the mortgage, while a variable rate is one that can either increase or decrease at the lender’s discretion, in accordance with market conditions. A capped interest rate is one which is subject to variations, but has a “ceiling” placed on it meaning that it can’t increase above a certain rate. Caution is advised when considering a variable rate mortgage; thoroughly research the topic, and make sure you know how your lender calculates your variable interest rate. You may wish to seek professional financial advice in this case.

If you are considering a buy-to-let mortgage, there are many things that you need to consider so that you obtain the maximum benefit from buying a property with the intention of renting it out to tenants:

What to consider

• Research the market – You must be sure that there is a healthy rental market in the area so that you will easily be able to find suitable tenants for your property. Your local authority housing executive should be able to help you identify the level of demand for rented accommodation. Also be aware of new businesses or companies that are starting in the area, as employees who have possibly relocated will be searching for accommodation.

• Your target market – Do you want your tenants to be students, professionals, or families? Your purchased property should be furnished accordingly; there is no point in decorating the property with antique furniture if you plan to let students live there.

• Location – This is very relevant to the type of people who will be letting your property. A family will want spacious accommodation, probably with a garden and garage, whereas young professionals may wish to be located near a train station so they can commute to work easily.

• Your personal taste – it is important to keep in mind that renting accommodation is a business, and as such it is crucial that you cater for the needs of your target market, not for your personal wishes.

• Protection – It is very important to insure your payments - try Mortgage Protection Insurance for help.