Landlords come in many different guises, some are first-time landlords, ‘accidental’ landlords and experienced investors with large portfolios
How Do Buy To Let Mortgages Work?
Buy to let Mortgages allow the borrower a first charge loan using an investment residential property as security.
A buy to let mortgage provider will lend to a maximum percentage of the property purchase price depending upon their lending criteria, typically the maximum loan to value (LTV) available is 85%. The lower the LTV generally speaking the lower the interest rate charged by the lender as their risk is reduced.
For example on an Open Market Valuation (OMV) of £100,000 you would need a deposit of £15,000 (£100,000 less £15,000 = £85,000 which is 85% of the OMV).
As a long-term product, mortgage rates tend to be very competitive. The majority of mortgages offered by Lenders are interest only, this means that each month of the mortgage term you will only pay interest on the loan and not repay any of the capital.
Both fixed or variable rate mortgages are available. A fixed-rate mortgage allows the borrower to plan monthly expenditure, whilst a variable rate mortgage has the advantage of a potentially decreasing monthly repayment.
A buy-to-let mortgage enables the property to be rented with the mortgage repayments covered by the rent generated by the tenant, usually through an Assured Shorthold Tenancy (AST). Buy to let mortgages cannot be used for Serviced Accommodation properties which are generally rented out for a maximum of 28 days to one individual or party.