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Buy to Let Mortgages

Buy to let mortgages were a fairly recent introduction to the mortgage market to cater for increasing numbers of people who were investing in property.

A buy to let mortgage differs from a standard residential mortgage, in that your normal income isn’t necessarily a primary factor in assessing the suitability of the mortgage.  Instead major factors include the value of the property and the expected rental income.

While your household income will almost certainly be assessed when you apply for a mortgage on your home, the advance you receive from a buy to let mortgage is based largely on the potential rental income rather than your household income.

Nowadays most lenders won’t usually lend any more than 75% of the value of the property, although of course there may be exceptions at any particular time.

With a buy to let mortgage you must expect to achieve a certain level of rental income defined as a ratio of your monthly mortgage repayment; this is typically no less than 125%.  To illustrate this, if your normal monthly mortgage repayment was £400 per month, then you would need to expect a minimum rental income of £500 per month (that is, £400 x 125%) to qualify for this particular buy to let mortgage.

You will have the option of which repayment method to use.  Interest only buy to let mortgages are attractive to many investors who need to keep initial repayments to a minimum.  An interest only mortgage achieves this because the principal sum loaned isn’t repaid each month (only the interest is repaid each month).