04 Aug Buy to Let Mortgages In A Nutshell
Buy to Let Mortgages In A Nutshell
A ‘buy to let mortgage’ is a name we hear when looking into ways to maximise the benefits from our current property portfolio, or looking ahead at how we could enjoy a much richer retirement by investing in rental property – but what exactly is a buy to let mortgage?
A residential buy to let mortgage is a loan for purchasing or refinancing residential property which is let to tenants rather than lived in by the borrower.
These loan types are classed, not as a simple extension of your own personal lending, but as a business proposal – in other words, you are going to borrow to buy a property to run a property business of your own.
Interest rates and product fees are typically a little higher than those you would find with a standard home-owner residential mortgage, due to the risk profile mortgage companies attach to this kind of borrowing.
You’ll need a larger deposit too – the maximum you can borrow for BTL is around 85% loan-to-value, although there are many more deals available at 75% LTV and with better rates. If you can afford to go down to 60 percent or below then you will get the best rates at this level of LTV.
But one thing is for certain – if you understand exactly how to structure your loans and property portfolio, a buy to let mortgage can be a very effective way of maximising the income generated.
As you now know, this is a business activity, therefore you should, before borrowing, have a sound business plan in place.
This does not have to be a bloated spreadsheet but should have projections of the highest interest rates envisaged in the medium term at least. With a check of affordability should interest rates reach such a level.
Members of Buy-to-Let-Mortgages.org.uk have access to proven resources – crafted and tweaked over years of successful portfolio building.
Peter J How, if you haven’t read his All About Buy to Let Mortgages book yet, started with a financial pot so small that many of us could start with the same amount using a typical credit card.
Yet whilst he hoped for the best, he planned for the worst, to make sure all the bases were covered. This includes making sure you have a good idea of what rent income is required to adequately cover your mortgage payments.
What Are the Risks?
The biggest risk for buy to let mortgages is what you should have had, in your business plan, as a worst case scenario – no tenants for a prolonged period of time. This includes after having damage to your property making it unlettable for a considerable period of time. This can happen.
It comes down to your research into an area, your business plan, watching the trends of the property market and understanding the business as a whole.
Before you start spending money on mortgage brokers or solicitors, take the time to understand the principles – an easy read book is All About Buy to Let Mortgages by Peter J How – or even take the opportunity, currently offered by Peter, to get a hold of his free summary book on buy to let mortgages with all the key lessons that can prevent you making expensive mistakes.
Peter built up a portfolio of 40 rental properties in little over 10 years, and all done in his spare time while working for a living. This was done mostly by using mortgage money, and using very little of his own money (because he didn’t have any!). Exactly how he achieved this is revealed in his book.
If you are going to take a risk, take a calculated one backed by sound advice. Start with Peter’s free summary book by clicking right HERE