A guide to buy to let loans

In the last decade or so an increasing number of homeowners have purchased properties to let out. Why? There are many reasons, namely, another source of income, investment, to establish a property portfolio and so on.

Many lenders and mortgage companies have raced to bring out new products or relax lending policies in order to service the buy to let sector of lending. The most popular method of securing a loan is to apply for a buy to let mortgage against the property to be purchased. Depending on the lenders borrowing policy, the applicant is usually required to contribute a deposit of between 5% and 20% and prove that the rental income exceeds the mortgage repayments. In addition a valuation survey is normally required and the homeowner must pass all of the statutory checks made by the lender including any applicable bad credit history and residency information.

An alternative method of funding a buy to let project used by some homeowners is to release equity in their current property by applying for either a secured loan or re-mortgaging. This option is only applicable provided the homeowner has sufficient equity in the house and can demonstrate sufficient income to pay the higher mortgage or secured loan repayments.

The last option is only available to those lucky few who have sufficient savings to invest and do not need to borrow capital. Always consult an independent Financial Advisor regulated by the Financial Services Authority for further information on financing any buy to let scheme.