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Buy to Let Mortgages

Buy to let mortgages are designed for those wanting a mortgage for the purpose of letting the property out to tenants.

These mortgages have become increasingly popular over the past few years, driven by increasing house prices, a strong demand for rental properties and a drop in the interest rates available to private landlords. A wide range of buy to let mortgages are now available, including fixed rate, discount, tracker and variable rates.

Buy to let mortgages differ to residential mortgages in three main ways:

• Rent Potential - the decision as to whether or not a mortgage will be offered is usually based on the rent you will earn as well as your income. In some cases your income is not considered.
  
  
• Interest Rate - buy to let mortgages have slightly higher interest rates.
  
  
• Larger Deposit - typically a minimum of 20% or 25% of the property's value is required as a deposit.

When you manage a property there are many costs involved in addition to the monthly mortgage repayments. As a guide, you should be aiming to achieve a gross rent of about 130% of the rental property's mortgage repayments (interest only) in order to cover your costs.

The additional costs include:

• insurance - building insurance and content insurance for those items provided as part of the rental agreement.
  
  
• furnishing - the purchase of any furniture if the property is to be let furnished.
  
  
• legal insurance - to cover the costs of evicting tenants in the event of non payment.
  
  
• decorating costs - the property may require work ranging from painting to a new bathroom suit before it is suitable to be let to tenants.