Buy To Let Mortgages

2007-03-08 10:33:40

( Financial )



There are different types of mortgages. And one of it is what you call a buy to let mortgage.

Buy to let mortgages are mortgages wherein you sign up to buy property which you intend to let tenants for rent. This will become a long term investment. Definitely, you will expect that you will earn from this investment. In here the amount of money lent is determined through the valuation of the property to be let. Most of the time, your annual income has to compensate for a certain percentage of the mortgage repayments. It's usually around 120%-150%. This is to allow surplus to compensate for other costs like maintenance and when there are no tenants occupying the property. The amount of money lent is also usually linked to the amount of rental income you may receive.

But there is no guarantee that you will earn from buy to let mortgage investments.

The Association of Letting Agents (ARLA) first coined the term buy to let. But this type of lending has existed prior to the coining of the term.

As mentioned earlier, there is no guarantee in buy let mortgages. And it's not safe to say that you have the best buy to let mortgage. There are risks that go with buy to let mortgages. For example, when the mortgage rates go up and you have some things to repair in your property, your income and your profit is reduced. Another instance could be when your property has not been occupied for longer than you expected or the income you receive from the property is lower than expected. You have less means to pay for the mortgage repayments. Or probably that the house prices do not rise and fall as you expected. Or the house is in poor condition or is poorly located. These instances may cause you to spend more than what you earn. That's why this type of mortgage is risky since it is also setting up a business on your own.


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