Buy to let mortgages are not as complex as the wording sounds. If you wish to buy a property and lease or rent, also known as “let”, the property to someone to use, then buy to let mortgages will save you money over older mortgage types.
Once, the only types of loans that allowed an investor to purchase opportunity using mortgages, and then let the properties be rented, were commercial mortgages. The high interest rates discouraged many potential property investors. High down payments were also a constriction point in buy to let loans. Lending companies saw the need to create a type of mortgage that provided for the needs of these buy to let mortgage investors; hence the advent of buy to let financing in the mortgage arena.
Loans for property to let will always carry a slightly higher interest rate than a primary residence home loan. This is because the lender is taking on additional risk. There are some very competitive buy to let mortgages from many lenders.
There are several ways to go about obtaining rental properties. One is to consider using home equity loans to purchase the property and taking only a very small loan on a buy to let basis at the higher interest rate.
Buy to let mortgages at fixed rates are a good option.
Lenders use different ways to calculate your qualification for financing for property to let. Some look at the amount of your income plus the rent expected on the property the buy to let mortgages will involve. Others use the 125% of the rent-to-payment ratio rule. This means the rent from the property must be 125% of the mortgage payment. Others use purely the rental income to calculate the loan.
There are interest only mortgage loans, but the disadvantage of these types of mortgages is that you have no firm payoff date. If you want the investment to pay you retirement income, for example, then you would want a mortgage that will be paid off before retirement.
Don’t let anyone tell you that you can only get commercial loans for your buy to let property. It’s not true. Investigate and you will find many lenders ready to provide you non-commercial mortgages for these properties to buy and then let.
Special Mortgage Types
The 40 Year Mortgage
Buy to Let
Adjustable Rate (ARM)
No Cost Mortgages
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