Buy to Let MortgagesPosted on September 6th, 2010 William No comments
A buy-to-let mortgage is one used to buy a property specifically for the purpose of leasing; the term is primarily used in the UK. Generally a property is purchased with the expectation that the value of the property will rise, allowing it to be later resold at a profit; in the meantime, the property is to be let with the hope that the rental income will cover the cost of the loan. Of course, there is no obligation to resell the property; the landlord may simply intend to let it out indefinitely.
Buy-to-let can be a popular investing strategy in a down housing market, as properties can be obtained for a fraction of their previous value; additionally, lower interest rates make it easier for the rental amount to cover the cost of the mortgage. When the intent is to resell the property within a few years, buy to let mortgages are often make as interest-only loans, to keep the payments as low as possible until the value of the property increases.
When considering a buy to let investment, you want to do your homework; this is not an asset that you can sell off quickly! Spend your time finding a property in a safe area where you'll have an easy time attracting renters. Remember that the mortgage is not the only cost of owning a home; you must also pay taxes, repair broken appliances, etc. Additionally, when (not if) something goes wrong with the house, it's your responsibility to fix it in a timely manner; if you are not able to be consistently available, you will have to hire someone else who can be. Be sure that if the furnace breaks or the buyer disappears without paying the rent, you'll be able to cover the expenses.
For someone with a reasonable amount of readily-accessible cash and sufficient free time (say, someone taking early retirement?), a buy to let mortgage is one way to take advantage of a down economy and purchase an asset that will produce for years to come.
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