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Buy To Let Mortgage
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If you are looking to buy a property to let it out as an investment then you can use a buy to let mortgage to help fund the purchase. A buy to let mortgage has been specifically designed to enable you to buy a property as an investment as opposed to living in the property.

The amount of money you can borrow on a buy to let mortgage usually depends on two key factors. Firstly they will have a maximum loan to value. Loan to value means how much the loan is as a ratio to the value. So for example if your purchase price was £100,000 and you were looking for a 75% loan to value buy to let mortgage then that would equate to £75,000

The second factor which determines how much you can borrow is the rental income that the property generates. Many lenders don’t necessarily look at your income to determine this; however they may have a minimum income that they require from you. Instead they look at the rental income and apply a calculation to work out how much you can borrow. For example a common calculation is that the rent needs to be 125% of the mortgage payment, so if your mortgage payment was £500 a month you would need a minimum rent of £625 a month to get the buy to let mortgage amount you need.

When buying a property as an investment then the most common way to purchase is by using a buy to let mortgage. It is therefore important that you get the best buy to let mortgage rates possible. The better the rate then the better your cashflow will be each month as you will be spending less on your monthly mortgage payment. Buy to let mortgage rates are not the only figures you need to look at when choosing a mortgage, you also need to take into account the mortgage fees that are associated with any buy to let mortgage rates.

Firstly you have the valuation fee which is paid to a RICs surveyor to come out to the property in order to give it a capital value and rental value. The amount payable for this does depend on the lender you use and can often be hundreds of pounds different form one lender to another even though it’s the same valuation! Secondly the amount of arrangement fees a lender charges can also have an impact on the how good the buy to let mortgage rates are. Lenders usually charge an arrangement fee as either a flat amount or a percentage of the loan. For example on a mortgage of £100,000 if it was a 2.5% arrangement fee then that would equate to £2,500. As this amount can often be added to the loan it is important you calculate your buy to let mortgage rates based on the increased amount which in this example would be £102,500.


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