Buy to Let marketplace
Buy to Let mortgages are a relatively recent phenomenon, first becoming available in 1993, before this date these transactions were carried out on commercial mortgage terms. Today, there are approximately 40 Buy to Let lenders operating, who offer over 250 different products. In general Buy to Let mortgage lenders operate according to short term strategic business targets, setting up lending pools for each particular mortgage product, when these pools become empty the product is withdrawn from the market.
The current characteristics of Buy to Let mortgage products tend to be:
Loan to property value: 85% maximum
Structure: Interest only or Capital and Interest
Rent to Interest Cover: 100% to 130%
Maximum Loans: £1M to £10M
Financial Instruments: Fixed Rates, Variables and Trackers
Unlike residential mortgages which will be calculated on the basis of the applicant’s salary, Buy to Let mortgages operate differently, the mortgage lender applies a rent to interest cover calculation. This means the borrower must be able to prove they can obtain enough rental income from the tenant to cover the interest on the mortgage; the rental cover percentage will vary between lenders, the monthly rental will however need to be between 100% and 130% of the monthly interest payment.
The decision of whether an investor chooses an interest only or repayment Buy to Let mortgage will very much depend on the individuals investment strategy. Repayment is suited for the investor using property as an alternative pension plan or looking to build a small property portfolio whereas with an interest only strategy the investors aim is to continue building their portfolio, by choosing this strategy the investor is able to re-gear their property capital in order to increase their number of properties.
According the CML (Council of Mortgage Lenders) at the end of the second half of 2007 there were 1,038,000 Buy to Let mortgages outstanding, a 23% increase in value over the previous year. Buy to Let lending accounts for 10% of total outstanding residential mortgage lending.
As a leading mortgage broker, we’re independent of lenders and therefore are impartial, so we will be able to use our expertise to recommend the correct mortgage for you. Before selecting a mortgage broker it is essential to check that they are independent, otherwise you may not receive unbiased advice. We offer a broad range of Buy to Let mortgages specifically designed to suit the varying needs of the investor.
Buy to let mortgages are not regulated by the FSA (Financial Services Authority), unlike domestic residential mortgages.
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David Lawrenson is the author of Succesful Property Letting - How to Make Money in Buy to Let the UKs top selling buy to let book and runs a property investment seminar and consultancy company at which includes a blog. He is not affiliated with any property company or finance provider, and as such provides independent, unbiased Buy to Let and property investment advice and consultancy to financial service companies as well as to individuals. Lawrenson is also well known as an expert property speaker and freelance property writer.
