If you are considering buying a property for letting purposes, and you are comparing buy to let mortgages to look for the best deal, you will want to make sure that you take a number of factors into consideration before choosing your preferred supplier.

In this article we discuss the background of where the market is today, we look at how much you can typically borrow and under what terms, we explain some of the factors you will need to take into consideration if you are approaching a buy to let mortgage lender for the first time, and if you are already a landlord, we look at some options for equity release on your existing properties in order to free up some cash.

Buy to Let Mortgage Providers – Where They Currently Stand

Buy to let mortgages are not as easily arranged today as they were a few years ago. In the mid-noughties (2004-2006), there was a significant property boom in the western world, where many people got into the market, took out buy to let mortgage deals, rented out their properties and sat back smiling while they saw both the value of those properties increase and a enjoyed a nice steady income stream from rentals, which (at the time) more than covered their mortgage payments.

However, fast-forward a couple of years to 2007-2008 and everything changed. The property market turned. Both property values and rental incomes decreased to such an extent that many home loans were foreclosed, including a massive number of buy to let morgages.

With so many people defaulting on their loans, banks and other lenders are now (2009/2010) much more cautious about offering cheap buy to let mortgages, which is probably a very good thing, considering how close we came to a global financial meltdown as a result of irresponsible lending/borrowing and the resulting credit crunch.

So What Kind of Buy to Let Mortgage Quotes are Offered Now?

Significantly more stringent ones than were offered a few years ago! Seriously though, they may be harder to find but if you can put together a good, solid rental income forecast, you should be able to compare buy to let mortgages from a range of lenders. Typical deals are in the region of 3x your salary or income, plus a percentage (usually around 50%) of the projected annual rental income. A good rule of thumb when approaching a prospective lender is to show a projected rental income that is at least 125% of your expected monthly mortgage payments.

Things to Consider When Looking for a Buy to Let Mortgage Deal

The first and most important thing to consider when buying a property to let as opposed to buying your own home is that you should treat the whole thing as a business. So you need to get your facts and figures straight in terms of projected revenue, profit and cash flow.

Finding the right property in the right location is only part of the whole equation. But even that aspect needs to be thought through carefully and dispassionately. Thin carefully about the area where you are planning to buy. Are property values expected to rise? Will you find a ready supply of good tenants? Are you near a university or a central business district for example?

Then you have to consider your obligations as a landlord. Ensuring safety of gas/electrical utilities, performing general maintenance, ensuring there are no fire hazards, etc are all things you will have to take care of. A letting agency can manage many of these things on your behalf, but generally such agents charge anywhere between 10% & 20% of the monthly rent, and you are still overall responsible.

Buy to Let Remortgages and Equity Release

If you are already a landlord with an existing property portfolio, there are many lenders who offer equity release schemes to free up cash without you having to sell any of your property. Equity release schemes can be particularly attractive for the over-55s, because a number of mortgage firms offer deals specifically targeted at that market. Under these kind of deals, interest is “rolled up” and only paid when the borrower dies, goes into permanent care or eventually sells a property. There are often some good tax breaks with these kinds of deal too, so they are worth checking out.

In conclusion, the buy to let mortgage market is alive and well, but lenders are a lot more choosy about who they give their money to than they were five years ago. This is a good thing because it will prevent the whole thing spiralling out of control again. And as long as you can show a sound business plan for your rental property and that you are creditworthy, then tapping in to some of the best deals on buy to let mortgages should not be a problem.