Home > Buy To Let > Buy to Let Mortgages

Buy to Let Mortgages

By: J.A.J Aaronson - Updated: 10 Aug 2012 | comments*Discuss
 
Buy Let Rental Mortgage Agent Arla Loan

The buy-to-let sector has suffered significantly as a result of the recent recession. But, with the property market remaining sluggish and many 'accidental landlords' having fled, buy-to-let still presents genuine opportunities for serious investors.

Buy-to-Let

As is described in more detail elsewhere on this site, the Association of Residential Letting Agents introduced a set of guidelines governing the process of private rental. Previously, individuals wishing to offer property for rent for subject to corporate finance rules. Now, however, it is possible for non-corporate landlords to gain access to mortgages and other substantial loans at regular consumer rates.

There are certain preconditions which must be met in order to qualify for a mortgage of this sort. One of the major advantages of the new ARLA scheme (known as Buy to Let) is that projected rental income can be counted as a method of loan repayment. The intention was that this would allow buy-to-let investors to borrow a larger proportion of their income than conventional borrowers. But, as mortgage lending dried up, this ceased to be the case.

Today, though, the buy-to-let mortgage market is again expanding, and there is a number of potentially attractive deals available.

Market Fluctuations

Buy to Let mortgages are a higher risk proposition for lenders than standard secured loans. This is because, although apparently currently sturdy, the market is prone to fluctuation. As such, there is no guarantee that your property will be consistently occupied. Any significant break in tenancy could have a considerable impact on your ability to make your repayments, and your lender will therefore wish to minimise this risk to as great an extent as possible. One of the methods by which this is achieved is the employment of a reputable letting agent who, under the new guidelines, must be an ARLA member. This demonstrates that you have researched the market properly, and have sought the advice of a local expert.

You should also be aware that any potential lender will expect to see a viable financial contingency plan which you would be able to employ in the case of the failure of the project. This would essentially involve you demonstrating your ability to find other means of payment in order for the lending institution to be confident that the risks to their money are as slim as possible.

Favourable Terms

If you can fulfil these criteria, you can expect to be granted mortgage terms as favourable, if not more so, than those afforded to owner-occupiers. Repayment plans are likely to be flexible, and could extend for up to 50 years. As always, however, you should aim to pay off your loan as quickly as possible in order to keep a cap on the total amount you will repay. You should set your rental price accordingly. You may, however, find the loan to value ratio (the size of loan to which you are entitled, expressed as a percentage of the total value of the property against which it is secured) curtailed to around 80%. As a result, you should be prepared to bear incidental costs such as agents' fees through your own existing capital.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • MoneyExpertise
    Re: A Guide to Unemployment Benefits
    Lib - Your Question:I was made redundant 3 years ago. I have been living abroad 5he last year & half. I am now back in the UK…
    27 July 2017
  • MoneyExpertise
    Re: A Guide to Unemployment Benefits
    Amy - Your Question:Im 17 years old and have 20 days until I have my baby at the moment I am getting income support but I am…
    27 July 2017
  • Lib
    Re: A Guide to Unemployment Benefits
    I was made redundant 3 years ago. I have been living abroad the last year & half. I am now back in the UK but I am Ill &…
    27 July 2017
  • Andrew
    Re: A Guide to Unemployment Benefits
    hi, my son has just given up his part time job and will be unemployed for 1 month,while he waits to start his Masters in mid…
    26 July 2017
  • Lib
    Re: A Guide to Unemployment Benefits
    I was made redundant 3 years ago. I have been living abroad 5he last year & half. I am now back in the UK but I am I'll &…
    26 July 2017
  • Amy
    Re: A Guide to Unemployment Benefits
    Im 17 years old and have 20 days until i have my baby at the moment i am getting income support but i am wondering if there…
    25 July 2017
  • Roxy
    Re: How Much Tax do I Have to Pay?
    My husband has started a new job if he gets £560 a week how much will his take home be after tax?
    25 July 2017
  • MoneyExpertise
    Re: A Guide to Unemployment Benefits
    Sue - Your Question:I'm 60 years old the carer for my 7 yr old grandson and after 17 years of working for the same company I…
    21 July 2017
  • Ade
    Re: How Much Tax do I Have to Pay?
    @Robhattan1 - he will get a tax return if he earns below £11,500, or even if he earns above he still might have paid too much tax.
    21 July 2017
  • Sue
    Re: A Guide to Unemployment Benefits
    I'm 60 years old the carer for my 7 yr old grandson and after 17 years of working for the same company I have been offered a…
    21 July 2017
Further Reading...
Our Most Popular...
Add to my Yahoo!
Add to Google
Stumble this
Add to Twitter
Add To Facebook
RSS feed
You should seek independent professional advice before acting upon any information on the MoneyExpertise website. Please read our Disclaimer.