Buy-To-Let mortgages are basically business loans that are disguised as mortgage loans. This is because even though the loan is provided to buy a house, it is provided to someone who already owns a home and is looking to buy a new home in order to generate income form it by letting it out on rent.
Buy-To-Let mortgages allow a borrower to obtain a mortgage on a property that will be let out by the borrower to a tenant. Buy-To-Let mortgages have gained popularity over the years because of the rising costs of residential properties and also because entrepreneurs are considering it as a new and viable business opportunity.
Buy-To-Let mortgages are ideal for people who plan to own a second property. The second property can be let out so that it earns more income. With the rising costs of real estate and its rentals, Buy-To-Let mortgages have also become popular with entrepreneurs. The income, in terms of rent, that is generated from the property can provide a steady stream of income. Over the years, the appreciation of the property will also increase thereby fetching more in terms of assets to the landlord.
It has been estimated that over a million households live in buy-to-let properties, which is indicative of the immense value and prospects of the business. In addition, it is believed that the buy-to-let sector contributes over GBP30bn to the economy each year. By the end of 2006, about 849,000 loans worth GBP94.8bn had been availed for buy-to-let mortgages.
In a Buy-To-Let mortgage, the lender will assess the worth of a property and existing rents in the area before providing a mortgage. In addition, lenders will also require a deposit, which usually is about 20-25 percent of the value of the residential property, from the borrower. Before the mortgage is provided, the lender will also decide a monthly repayment plan.
One needs to do a lot of research on factors such as cost of the property, prospective tenants, existing rent in the area etc., before deciding on acquiring a Buy-To-Let mortgage.
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