What is a Rental Mortgage? Buying a property with the intention of letting it out is currently a popular form of investment. It is a condition of most mortgages that the property cannot be rented out. A "Rental Mortgage" also known as a "Buy to Let Mortgage" is a mortgage specifically intended for the purpose of buying properties that will be let or rented.
Buying a property to rent it out can make money in two ways: firstly the rental income itself, and secondly any increase in the value of the property as an asset.
Ideally the rental on the property should be at least enough to service the mortgage and cover the costs of maintenance of the property and administration costs for the business of being a landlord.
What's Different About a Rental Mortgage? A Rental Mortgage will allow you to let the property. Rental Mortgages usually have a higher interest rate than a mortgage for your home. Your income for the purposes of obtaining a Rental Mortgage may include the rental income from the property itself. Rental Mortgages may only be available for up to 65% to 85% of the property value - mortgage insurance may be required for the higher percentages.
What could go wrong? Whilst property prices are rising, interest rates are low and the rental market is buoyant everything may seem fine. However, if interest rates increased and property prices fell, you could find yourself in the situation where you can no longer find anyone willing to let the property from you at a rent that will cover the mortgage, whilst the falling value of the property leaves you with negative equity. You also need to take into account your duties and responsibilities as a landlord. Even if you find an agent to look after this for you, you will rarely be totally isolated from this aspect of the business. Not all tenants are ideal!
If you still want to proceed with this from of investment, find your property and seek out your mortgage supplier.
Compare online quotes to get up to date information on the current deals available and their specific terms and conditions. Mortgage calculators allow you to work out what a specific mortgage will cost you. may be made online but seek independent advice before making any final commitments.
Remember, a mortgage is security for a loan in the form of the provision of a right in property, such as land or buildings. Typically, if terms of the loan are not met, then the lender has the right to sell the property to recover the debt.