But To Let Mortgages Face Higher Interest

2007-08-27 14:20:08

( Financial )



But to let mortgages, or buy-to-let mortgages, are special mortgages that investors take out to purchase buy to let property. The buy-to-let market has boomed in recent years for a number of reasons: low interest rates, a housing shortage, an influx of immigrants all looking for places to stay, and a surge in property prices. Mortgage lenders have seen the opportunity and are competing hard to offer investors the best buy to let mortgage.

The availability of attractively packaged but to let mortgages has encouraged many investors into the market. You can find it easy to accumulate a portfolio of buy-to-let properties, because lenders have been liberal with their terms. In most cases, you can obtain individual but to let mortgages for each property at 130 percent of the rental income expected from the property.

If you are an investor in buy-to-let property, but to let mortgages will constitute your biggest expense. It is important for you to work out arrangements for the lowest possible monthly payment. This is especially critical due to the rise in interest rates that began a year earlier. There have been four rate increases in the course of the year and at least one more is forecast before fall.

If you took out but to let mortgages a few years back and are about to finish the fixed rate period, you now have to contend with a higher interest rate that you never expected. These but to let mortgages thus face bigger repayments which may not be sufficiently covered by the rent incomes you earn from the let property.

You will have to arrange for a mortgage loan refinance deal before the fixed term ends. Otherwise, your but to let mortgages will automatically revert into the lender's standard variable rate, and you may have to pay greater amounts than you are prepared to do.


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