The buy to let mortgage - benefits and risks

A buy to let mortgage is provided to purchase a property as a business investment in the private rental sector. With a buy to let mortgage you can typically borrow  up to 80% of the property value, depending on your circumstances. You are assessed as though you are the person occupying the dwelling. The  mortgage assessment can either be based on projected rental income or your earnings dependent on the lender’s individual policy. Where the assessment is based on rent received, most lenders would expect rental income to be at least 30% higher than the buy to let mortgage repayments.

benefits

A buy to let mortgage allows you to increase your net asset value both via income from rent and any rise in the value of properties you own, providing you do your homework and treat purchases as a business investment.

risks

There is a right time and a wrong time to purchase a buy to let business investment. If you purchase at the top of the market, your property may lose value. At the same time, rent yields may fall if the area you purchase in has a glut of rental properties.

Your rent income must be able to cover the costs of the buy to let mortgage, the costs of maintaining the property, the costs of a management agent (if you are not doing this yourself), as well as income tax which you may be subject to.

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