Buy to Let Mortgage Basics

Buy to let mortgages are widely popular in the UK housing market. Ten percent of all mortgages taken out in 2006 were to buy property in order to rent it out privately to tenants. This type of mortgage can be a sound investment if you have done your research. There are specific mortgages for buy to let mortgages, and if you are an investor you will want to have the knowledge on hand before discussing a buy to let mortgage with a lender.

The goal of this article is to explain the buy to let mortgage basics, and it will also cover why buy to let mortgages are so popular, the different types of mortgages specific for buy to let investors, how much you can borrow, how much is required for a down payment, and where you can find a buy to let mortgage. 

Why Buy to Let Mortgages are Popular

In the UK, buy to let mortgages are increasingly common for several reasons. Comparatively, it is a good investment. The stock market fluctuates and it can be incredibly risky. However, with the population growth, steadily high divorce rates, and an increasing number of college students, there is plenty of demand for rental properties. With good to excellent credit, you can find low interest rates on buy to let mortgages.  Buy to let mortgages are competitive and specifically designed for landlords. By obtaining an interest only mortgage, buy to let owners are able to make smaller payment initially. This is a great option for people who are looking for long-term investments. Over time, property values can increase and your investment can pay for itself.

Types of Buy to Let Mortgages

Historically, buy to let mortgages required variable interest rates. Fluctuations in the market could raise or lower monthly payments. Most investors appreciate knowing how much their mortgage payment is every month because it affects how much the landlord should charge per rental. Luckily, variable interest rates are in the past, and nowadays, you can find buy to let mortgages with fixed rates, flexible rates, and interest only. By understanding buy to let mortgage basics, an investor can determine which type of mortgage best fits their property investment plan.

What is an Interest Only Mortgage?

Fixed and variable rates can be paired with an interest only mortgage.