What is a “Buy To Let” Mortgage? What Should You Look For in a Lender?
A Buy-To-Let mortgage is a special type of mortgage loan that is not intended to go toward purchasing a primary residence; instead, the proceeds of such a loan are used to buy rental properties. Although there are a significant number of lenders who have programs available for this market, that number is still drastically low when compared to the number of lenders in the residential market. For this reason, the Buy-To-Let borrower must search longer and harder for an appropriate lender, and may face a more difficult time in finding one with exactly what he’s looking for.
Buy-To-Let mortgages usually have features that are similar to any other standard real estate contract; therefore any experienced property owner should be familiar with the terms of these loans. The significant differences come with the application and approval process of such loan requests. Since the lender would be providing funds to purchase an investment property, there are obvious risks that are above and beyond those found with the purchase of a primary residence.
To address such risks, the lenders often request additional documentation regarding the applicant’s financial status in an attempt to better determine his ability to repay the loan. Plus, lenders will often request specific and verifiable information regarding the current and/or proposed rental price, tenant history, and sometimes even competitive analysis for the rental market in that geographical area.
Rental properties present a very profitable potential investment, which is why many lenders are willing to consider Buy-To-Let mortgages. However, as with any investment, there is no guarantee that profit will be made. This is the reason lenders exercise additional caution and have implemented extra procedures for better assessing their risk of loss with these types of loans.
