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Buy to Let Mortgages
Buy to let mortgages are designed for those wanting a
mortgage for the purpose of letting the property out to
tenants.
These mortgages have become increasingly popular over the
past few years, driven by increasing house prices, a
strong demand for rental properties and a drop in the
interest rates available to private landlords. A wide
range of buy to let mortgages are now available,
including fixed rate, discount, tracker and variable
rates.
Buy to let mortgages differ to residential mortgages in
three main ways:
- Rent Potential - the decision as to whether
or not a mortgage will be offered is usually based on
the rent you will earn as well as your income. In some
cases your income is not considered.
- Interest Rate - buy to let mortgages have
slightly higher interest rates.
- Larger Deposit - typically a minimum of 20%
or 25% of the property's value is required as a
deposit.
Becoming a private landlord should not be seen as an
easy way of making money. It is riskier, more complicated
and more time consuming than most other forms of
investment and there is no guarantee that house prices
will continue to rise. That said, letting a second
property to tenants can reap considerable financial
rewards over time.
When buying a property to let you will need to decide
whether your primary objective is income or capital
growth. In other words, are you looking to make a profit
month on month or are you looking to make a profit
through increased equity in the property as it increases
in value over time. The decision may affect the type of
property you purchase, and the location. For example, a
prime city centre location may be more suited to high
growth.
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