Questions about Buy to Let mortgages:
Buy to Let mortgages?
Mortgages for your main residential property are different from a "buy to let" mortgage which is in effect a
loan for a business venture.
A "buy to let" mortgage, as the name suggests is where you take out a mortgage to purchase a property which you then intend leasing out to a third party.
Most lenders now offer "buy to let" mortgages and the lending criteria can be based on the amount of rental income that the property is expected to generate, as opposed to your income. A deposit of at least 15% but more usually 20% or more of the valuation is usually needed for a "buy to let" mortgage. Rates are usually slightly higher than residential mortgages.
In the small print of most residential mortgages you will find that you cannot let out your property as a condition of the mortgage without the permission of the lender.
An alternative to a buy to let mortgage is of course to remortgage your residential property and use the extra funds to buy a second property. However, it would be worth taking tax advice to ensure you can still offset the interest on your mortgage against the rental income from your property for income tax purposes.
What is Equity Release?
Where equity is released from your property, by taking out a mortgage. It is most commonly used either
to fund other property, or for elderly people who might be "asset rich but cash poor". An equity release
can be taken to release a lump sum, which can be used to give income, by mortgaging, with either only the
interest being paid back, (interest only), or no payments at all as the lender is allowing the interest to
accrue against the future value of the property.
I want to buy a few properties to let out, are there lenders who will advice me on this?
There are lenders who specialise on buy to let and can give you an agreement in principal on a
portfolio of properties.
I want to buy a holiday cottage for holiday lets - is that a buy to let mortgage?
Not really. A mortgage for a cottage for holiday lets would normally be based on your ability to
borrow the money rather than the rental income from the cottage. In a holiday let the lender does
not have the security of a fixed term lease.