Essentially, a buy-to-let mortgage is provided to a borrower for conducting business.
The mortgage may be used by the borrower so that he or she can buy a residential property and let it out to another tenant. With the industry getting competitive and rates coming down over the years, buy-to-let mortgages have gained popularity and more people are considering it as a good business proposition.
Home owners may often find that letting out a property leads to more returns from it. This is particularly true if people have more than one house. Alternatively, owners can also pledge a home and build a new home so that it may be later let out to a tenant.
Buy-to-let mortgages have been designed to stimulate growth of the private rented sector by encouraging private investors. Entrepreneurs can take advantage of various business sops such as low, highly competitive, interest rates and the possibility of sustained capital growth in future. Earlier, even though buyers of property that were to be let have been forced to provide surcharges or were forced to borrow at commercial rates, private investors can now expect competitive interest rates. Similarly, earlier, the potential rental income was not usually taken into account for servicing the borrowings. Now, rental income is taken into account for servicing the loan. Such measures have in fact enhanced the creditworthiness of buy-to-let projects.
It is believed that there are about 1,200 Association of Residential Letting Agents (ARLA) member offices in the UK. They have a network of experienced lettings agents who comply with the ARLA Codes of Practice and the ARLA training and qualification requirements in letting and property management. This network of members and agents are enhancing the business and making it a viable alternative for private individuals.
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