Mortgage Types

Buy to Let

A buy-to-let mortgage, also known as an investment mortgage, is designed for borrowers who want to buy a property to let out to a third party (e.g. tenants). It is typically available up to 85 per cent of the value of the investment property and is normally interest only.

Buy to let mortgages are financed from monthly rental income rather than the owner's own earnings. The lender has to be satisfied that the potential rent can cover the monthly mortgage payments. The lender may ask for rent cover of up to 100% of the monthly payments.

Buy to Let mortgage deals depend on a number of key factors:

• The amount of mortgage you want will depend on the rental income of your property. In the current financial climate when the interest rate is that low, it is now slightly easier to secure the mortgage, as the requirement is less onerous.
• The lower the LTV (loan to value) the better the deal you will get in terms of interest rate. The normal advance on a buy to let mortgage is usually 60% to 85%.
• In a buy to let mortgage always consider the overall deal and not necessarily the initial pay rate because the fees, terms and conditions are critical as to whether a proposal is suitable.
• Rental cover required by lenders can be as low as 100% of rent based on a fixed rate product. The normal rental cover can be anything from 100% to 125% of the pay rate.

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