Posted on Sunday, 28th September 2008 by Chris Channing
Established individuals may be interested in a Buy to Let mortgage solution. Many banks and lenders will allow for this kind of mortgage even though it is not regulated by the Financial Services Authority.
Purchasing a home to let out to tenants has never been easier with a buy to let mortgage. Determining the loan amount is a simple process that is based on the projected rental income. The Financial Services Compensation Scheme does not cover buy to let mortgages when it is not regulated under the Financial Services Authority.
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.
Some lenders will let you borrow triple your salary and half the income of the rental property while others will let you borrow a lower amount based on other existing loan terms you may have with lenders. Your specific lending institution may have different loan options, or multiple options to choose from.
A borrower will need to get tenants as soon as possible to start getting rent income to help with repayments. There is also the chance that a borrower will not have tenants every day of the year, leaving periods of time where the borrower will still be making repayments to the mortgage lending institution. This may be a hardship on landlords with less income.
The house market tends to fluctuate a lot, making a drop in price one of the risks associated with this type of mortgage loan. Buy to let lenders may find them selves profiting regardless of the market value because the borrower will still be paying off the original mortgage amount. A buyer may end up owing more than the original value of the home. The profitable risk portion of this buy to let mortgage is rising property values. A borrower may find themselves making more than they anticipated, thus paying off their loan more quickly.
Closing Comments
Buy to Let Mortgages may be an option for anyone interested in making profit by purchasing a second, or more homes to let out to tenants. There are many options available for those who want to take out a buy to let mortgage.
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