100% Buy To Let Mortgage
Buy to let mortgage is an investment strategy in which an individual purchases residential property on mortgage and rents it out. The proceeds from the rent usually go towards the repayment of the mortgage. A buy to let mortgage means that the individual mortgaging the property, pays off 100 per cent of the mortgage using the rent received.
The investor enjoys profitable returns in two ways. Firstly, the rental income pays off the mortgage, thus creating home equity. Secondly, the value of the home may appreciate; again leading to creation of home equity. Using the home values appreciation, the investor can sell the home property at a higher price.
As a borrower, you would need a bigger deposit when opting for a buy to let mortgage as it is a riskier proposition for a lender than a residential deal. The maximum loan available on a buy to let mortgage is usually 90 per cent of the property’s value as compared to 100 per cent on a residential property.
A major advantage of buy to let mortgage is that borrowing is based on the rental income of the property rather than on your income. However, a lender would want to see evidence of the likely rental income and know that it covers the repayments with something to spare. Another advantage is that as buy to let mortgage is a secured loan, you can get extended repayment period, low rate of interest and smaller, affordable instalments. However, it involves the risk of repossession in case you default.
A buy to let mortgage is a good option for investors looking for a steady source of income and raising extra fund. Though it requires a large investment, the returns are good on the initial investment. Nowadays, buy to let mortgage have gained a huge popularity in the United Kingdom due to the rising costs of residential property.
