Buy to Let Mortgages

Buy to Let mortgage are different from a residential mortgage because the lender calculates the size of your loan not on your income but on the potential rental yield of the property you wish to buy.

Buy to Let mortgage lenders offer up to a maximum of 90% loan to value, although one or two have started to offer 95% Buy-to-Let mortgages. Therefore a minimum 10% deposit is required in most cases. Buying a property to let out has now turned into a viable and profitable option for many people. Although the emphasis is currently on longer-term investment rather than making a quick profit, there is still potential for a good return on your initial investment.

Broadly, there is little difference between arranging a Buy to Let mortgage for investor landlord’s and a standard mortgage for owner occupation. Buy-to-Let mortgages are subject to the usual status checks. Loans can be arranged for terms of between five and 45 years and for up to 90% of the value of the property, although the majority of Buy to Let lenders restrict lending to 85% of the property value.

Typically the mortgage lender calculates the maximum Buy to Let mortgage based on the rental income covering the mortgage by 100% - 130% of the proposed monthly mortgage payments based on anything from the pay rate to 1% over the Bank of England base rate on an interest only basis. Every lender calculates their maximum lending in a different way, but the following two calculations can be useful in determining either

1. the mortgage available if you know the rental income expected or

2. the rental income rquired if you know the maximum loan desired.