Buy to let mortgage how does it work guide




Asking yourself – buy to let mortgage how does it work?  Buy-to-Let are investment property mortgages. The term describes properties that are bought on a buy-to-let (BTL) basis, where the property owner has no intention of living at the property, and is more interested in drawing an income either through rental profits or capital growth, over a short, medium, or long term period. Property investment is considered to be a safer investment than equities as it has a long track record of strong growth and to be a safer investment option.

Summary Residential and Commercial BTL Mortgages
Residential Commercial
LTV to 90% to 85%
Fees £ fixed % of the loan
Rental Income assessed Y Y

Suitable Property For Investment Property Mortgages

The term investment property is applicable to both the residential and commercial markets, and as such lending options are much broader. Here we outline which lender options are available for various types of property, either RESidential or COMmercial.

Houses of Multiple Occupancy (RES)
Apartments (RES)
Houses or Bungalows (RES)
Businesses Premises – where more than 40% of the property is for business use. (COM)

That said, commercial property investments have seen stable and sustained growth in both the retail and industrial sectors over the period, and are considered by many to be a much safer and effortless investment than residential property. When deciding on a commercial investment property the buyer needs to carefully assess the availability of premises in the local area. Commercial property is typically a medium to long term investment product and is often slower to sell than a residential investment. Investment property mortgages for commercial properties are available from a wide choice of lenders. Again, all lenders have their own criteria for acceptance.

loan_mortgage (7)Buy to let mortgage how does it work really? When buying commercial property the buyer should attempt to enable a Lockout contract that mandates that the seller takes the property off the market, and holds the price. As part of the agreement the buyer warrants to complete the purchase within a reasonable time frame, often negotiated upfront. As with residential BTL property, a valuation will be instructed by the lender. This will encompass both the value of the bricks and mortar and provide details of current rental income, and potential income from unfilled space.

The valuation will also provide a cost for re-building the property which can be used as a guide when requesting buildings insurance quotes. As with investment property mortgages for industrial (owner occupied) premises, an applicant can expect to achieve a loan of up to 85% of the property value on many commercial property types. Loans are available for leasehold and freehold buildings, and can be based on the applicant company accounts.



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