What is a Buy to Let Mortgage ?
A buy to let mortgage is a mortgage loan that a building society or lender awards on the premise that the property acquired will be a source of income through letting. The source of income, the lender assumes will be used to repay the mortgage.
Benefits of a Buy to Let Mortgage.
The benefit of such a loan is that you might be able to cover the total monthly repayment with the income that you generate from the letting of the property. This means that you might be able to acquire the property without physically paying anything for it.
A buy to let mortgage can also be offset against tax.
Negative Aspects of a Buy to Let Mortgage.
Managing tenants can be tedious and cumbersome.
It is probably a good idea to seek the help of a letting agent. This however costs money. A further implication is that tax is due on any rental income.
Criteria when Applying for a Buy to Let Mortgage.
Because of the risk factor involved for the lender, you can expect to pay more deposit than on a residential mortgage. The interest rates may also be higher to compensate for the risk involved. The lender takes the estimated rental income and sometimes the applicant's other sources of income into account when determining the feasibility of awarding a Buy to Let Mortgage.
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