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This article was last updated on 19/10/2010

Buy To Let Mortgages


A buy to let mortgage, also known as an investment mortgage, is used to purchase a property for rental purposes. The idea behind a buy to let mortgage is that the rental payments will more than cover that mortgage payments and the extra can be used for maintenance and income. Buy to let mortgages also pave the way for a retirement investment, as the property can either continue to bring in rental income or be sold for a profit.

BTL mortgages are still a popular way to invest in real estate, despite the volatility of the market today. Although property values are not increasing at the same rates they were just a few short years ago, they do still tend to increase over the long term. This does not tend to be a good investment choice for people looking for a short term return or who need access to investment cash. As a long term investment, an investment property is a welcome addition to any portfolio, especially when it is balanced with other types of investments.

To ensure an investment in rental property is successful, it is important to take certain factors into consideration. Location of the property, type of structure and condition of the building are all important components in choosing the best investment. Most people pursuing buy to let mortgage properties find that working with an experienced agent is helpful in finding the properties with the greatest income potential.

A buy to let mortgage is handled a bit differently from a standard residential mortgage. While most of these mortgages run on an interest only basis, the interest rate is generally higher than other mortgage products. The average increase is often about one percent over the average rates of residential mortgage loans. Within that scope, investors can choose from a variety of buy to let products, including fixed rates, tracker mortgage deals or discount mortgages. This provides flexibility in the buy to let market so investors can choose the best product for their needs.

In order to ensure a buy to let mortgage is a good investment, the borrower must be confident that the rental rate will cover at least 120% of the mortgage payment. The excess pays for maintenance and insurance of the property. Some financial experts actually recommend that rental payments should be anywhere from 120% to 150% of the mortgage payment to ensure a decent return on the initial investment. This is another area where it pays to work with an experienced agent who can give you an educated guess on the earning potential of the property.

In addition to the many factors involved with choosing a rental property, the complex calculations involved with a buy to let mortgage mean that you should seek out an experienced mortgage specialist for the job. It is also important to note that the criteria used to approve buy to let mortgages goes beyond income amounts to the earning potential of the rental property. By working with an experienced professional in the mortgage industry, you can rest assured you will get the best buy to let mortgage for your needs.

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