Inexperienced landlords should be careful about buy to let mortgages

Inexperienced landlords with inadequate portfolios or experience in the buy to let market are being warned to be careful about easy buy to let mortgages where there is no requirement for the rent to be higher than the repayment amount on the mortgage.

Landlord Mortgages, a specialist buy to let broker, has warned rookie buy to let landlords to steer clear of mortgages that allow you to charge rent that barely covers the amount of the mortgage repayment.

According to Landlord Mortgages the rising number of 100% buy to let mortgages that do not require the rent to be higher than the actual repayment on the mortgage could lead to a rising number of repossessions in the future. The broker has suggested that these mortgages are best suited to landlords with experience and portfolios in the buy to let market.

Rising interest rates and increased property prices have made it difficult for many landlords to see the financial benefits of buy to let, as they are having to invest a lot more and pay higher repayments whilst still keeping rent competitive enough to generate interest from potential tenants. As a result of this a number of lenders have started offering 100% buy to let mortgages based on the circumstances and credit rating of the landlord.

A spokesperson from Landlord Mortgages stated: 'Lenders are potentially setting financial traps for novice landlords with 100% mortgages, forcing them to hand over their entire rental income to the lender each month, leaving them open to arrears if there are problems with rent collection. Landlords should always keep a 20% reserve up their sleeve, in case things go wrong.'

Tom Smith
04.06.07

More Information:

• Right to Buy Council Mortgages
  If you've lived in council housing for at least two years, you may qualify for a right to buy council mortgage under the 1980 Right-to-Buy legislation which was recently amended.
• Home Mortgage Loan
  Choosing the right mortgage is one of the most important decisions one makes while deciding finance. And the right decision can save you thousands of pounds. Know the facts before you move ahead with a home mortgage loan.
• 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