Buy to Let Mortgage

One of the most common roads to home ownership used to be buying a multi-family row house and letting the rents from other tenants pay the mortgage off for you. The buy-to-let mortgage is bringing the option of buying property as an income generating investment back into vogue.

Property can be one of the most profitable long term investments you can find. When you purchase a home for the purpose of letting it out, you are counting on a regular income in the form of rent, and a large asset - the house - with the potential to gain value over the years. A buy-to-let mortgage is a loan that's specifically designed to take rental income into account when deciding on terms.

Using rental income to pay the mortgage in a buy-to-let mortgage

With a buy to let mortgage, you use the income from rent to pay the mortgage payments rather than your income from a job or services. During the term of the loan, you can use the buy-to-let property to leverage home improvement loans, or to help finance the purchase of other properties. Like any other mortgage, once the loan is paid in full, you own the property outright and can do whatever you please with it. If you choose to continue to own the property, the rental income can be an ideal alternative to a pension or retirement money, delivered in monthly cheques from your tenants.

There are some differences between a regular homeowners mortgage and a buy to let mortgage. In many cases, the lender will require a substantial down payment - often as much as 15% of the total price of the property. More often, the bank will require evidence that you have at least three times the monthly mortgage payment in savings to get you through the first months when you're unlikely to see rental income from the property.

On the other hand, the lender will consider the potential rental income when calculating your ability to repay the loan - so while they may require more of an investment up front, your current monthly income will count for far less. Because your income will increase once you own the property and can let it out for rent, the mortgage lender will be willing to lend you a larger sum of money than without the rental income.

Many lenders now offer special buy to let mortgages with fixed interest rates.

While buying to let may seem like an easy road to wealth and financial success, it can take a lot of planning and effort. Because you'll be maintaining the property for others to live in, you'll have to maintain a certain standard of livability. Overall, though, a buy to let mortgage can make owning rental income property far easier. Shop around for the best deals online and locally, and choose a buy to let mortgage that offers the terms and repayment options that you are comfortable with.