It is worthwhile being aware of the following main differences between residential mortgages and buy to let mortgages:
• Often, you will arrange buy to let mortgages on an interest only basis. This means that you will not pay off any capital in the monthly repayments - unless you make overpayments - but would need to repay the capital in a lump sum at the end of the mortgage, often by selling the property.
• Interest rates on buy to let mortgage rates are usually a little higher than residential loans. If you purchase through a limited company, rates can be higher again but with potential tax benefits.
• Unlike a lot of residential mortgage rates, you will be required to put down a bigger deposit, usually in the region of 25%. Fairview Financial work with you to find the right rate with the right deposit.
• How much you can borrow will be based on the earning potential and profitability of the profit (i.e. the rental income) and sometimes your earned income. The rent must more than adequately cover the monthly mortgage payments. Every lender has its own unique formula and some will lend more generously. Fairview Financial will help to determine who to use on this basis.
There are various ways that you can seek to make a return on your investment; the property value and the ongoing rental income are the obvious ways. As with any investment, buying an investment property does carry risks, so it is important to speak to Fairview Financial to make sure you are clear where the pitfalls may lie.