Buy to let mortgages explained
Buy to let mortgages are for the purchase of property to let to tenants for residential use only.
If you have a property which mixes commercial space with residential letting, such as a shop with a flat attached a semi commercial mortgage may be required.
Loan amounts on buy to lets are usually assessed based on the rental income which might be generated by the property.
This could be either through the rental assessment made by the valuer or perhaps based on the tenancy agreement in force if you are looking at a remortgage.
However some lenders will also either take into account your own income or may base lending entirely on your own income.
It is a typical requirement for rental income to cover the mortgage by 125%. Recently though coverage requirements have been increasing.
This means that you will need the payment on the mortgage to be no more than four fifths of the expected rental income on an unfurnished basis.
Some lenders will take an even less favourable view by requiring the rental to cover the mortgage on a repayment basis rather than interest only.
Most buy to let mortgages are arranged on an interest only basis with the sale of the property being given as the method of repaying the outstanding mortgage balance.
It is also usual for lenders to be happy to arrange the mortgage with a term stretching well beyond retirement perhaps as far as your 75th or even 80th Birthdays or even older.
Loan to value limits on buy to let mortgages tend to be lower, at the time of writing a minimum deposit of twenty percent will be required.