Buy to Let Mortgages
Buy to let is a business and as such attracts a different rate for borrowing and buy to let mortgages (B2L) tend to be cheaper than regular domestic mortgages by around half a percent and this is reflected as a result of the degree of risk that the borrowing attracts (very little) compared to the generally higher risk associated in lending to owner occupiers.
B2L mortgages are very common these days - as a straight forward loan mechanism. However as usual, there are variations on a theme. Some buy to let mortgages now offer an exchange bond, which allows the investor, in return for an insurance premium, to NOT have to pay the exchange monies. It depends on whether the developer offers this.
B2L mortgages are not usually assessed on your income but on the rental that can be generated from the property and the rental cover required is usually 1.25 times the rent, although its been known that mortgage companies have gone to 110% of cover - you'd need to shop around. Having said this, you DO need to be credit worthy. If your existing credit score is poor, you'll be unlikely to get financing oh! and you also need to have a main residence.
Mortgages can be either interest only or repayment. As the tax allowances that you can get are for interest payable, any extra repayment does not count as an allowable expense. Go figure.
Of course the other factor is how much mortgage can you get? Generally the answer is 85% of the purchase price although sometimes 90% is achieveable depending on the rental yield.
All the financial institutions now offer buy to let mortgages and it really depends on who you approach. If you work with a number
of buy to let property investment clubs, you may be steered in one direction and then again, if you work with a specialist agency such as Baron Properties, then you'd wind up working with their preferred FSA appointed brokers. These type of companies make the whole buying a 'buy to let' an absolute breeze. Of course there are charges unless you want to do the whole thing yourself...
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