Why buy to rent mortgages are really helpful
Buy to rent or buy to let mortgages are special mortgage products geared towards investors who are interested in purchasing a property solely for use as a rental. Just like first time home buyer loans, these are loans that are designed for a specific purpose and have benefits for those who are seeking to use them for those purposes. These loans are usually quite strict and need to be applied only when all requirements are met.
A buy to rent mortgage is a special circumstance because the person seeking the mortgage loan will ideally not have to support the price of the mortgage. When a prospective homeowner is seeking a loan for a property that they will reside in, the bank needs to make sure that the homeowner will be able to make the monthly payments on time every month. The bank will look at the homeowner's debt-to-income ratio and salary history to make sure that the homeowner is not overextending themselves.
With a buy to let mortgage, the bank is still concerned about the homeowner's finances but they will not be looking at whether the homeowner can pay the mortgage themselves. Instead, they will be looking at whether the property can be rented at an amount equal to or more than the mortgage and tax payments. They will also be considering the fact that renovations may need to be done and that the property may be vacant for specific periods throughout the year.
Buy to rent mortgages can also be represented as investment mortgages from certain lending institutions, and foreclosures in particular may have better loan packages. Foreclosures will often offer better interest rates and lower down payments than traditional loans, though with a buy to rent mortgage the loans usually require a higher down payment than a loan for an owner occupied property. A lending institution such as Clydesdale Bank could discuss with a prospective property owner the intricacies of the different loan packages.
Investing in buy to rent mortgages can be an excellent way to build up net worth and create profit generating potential for years to come. However, even though the loan process is relatively simple being a property manager isn't always easy. Before investing in a buy to rent property a prospective property owner should do their research and be aware of the complexities of managing a property and the potential pitfalls that they may be facing in the days to come.
Michael Jones has a wealth of experience in personal finance. Michael often contributes to sites such as Financial News Group so head on over for more personal finance tips.