let mortgages: A Good Option ?

2008-04-28 11:58:20

( Financial )



Are you wanting to buy a home? Then you will need to apply for mortgage and will certainly be looking for a low mortgage rate. Or maybe if you already have a home and have some extra capital you might be considering the buy to let mortgages market.

There are many things you will need to consider when considering the buy to let mortgages market.

How to choose buy to let mortgages

Paying for the property
When choosing a property the most obvious things you should ask yourself are:
- how much can you afford?
- how much will you pay?

And if you want to get a mortgage, work out the percentage of the property’s value you have to borrow.

Lenders could allow you to borrow as much as 80% of the value of the property. The amount they allow you to borrow is usually determined by the rental income you expect. Your lender will want the rental income to be from 25%-50% more than the mortgage payment.

Choosing the right mortgage
Your choice of mortgage will be between an interest only loan or repayment mortgage.

Interest only mortgage – you could be required to have an investment product.

Repayment mortgage – you may be advised to have life insurance as well.

Your choice might also be between a variable and fixed rate mortgage.

A fixed rate loan – this gives you more certainty.

A variable rate loan – this might move up and down.

Remember also that your payments could increase if the interest rate rises. This all depends on what type of mortgage it is.

Whatever choice you make, take the advice of a lender or mortgage intermediary first.

And your costs?
- building insurance
- also consider taking out contents cover – especially in the case of furnished properties
- periods when you aren’t receiving rental – either because there is no-one on the property or because of tenants who are behind with payments
- maintenance costs
- increase of mortgage repayments with interest rate rises. You might not be able to recover this by increasing the rent.


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