Property investment mortgages

Property Investment mortgages can be used to buy one extra property or a number of different homes by way of an investment. Some people wait until the housing market flattens, and then use finance to buy a number of properties in the assumption that prices will go up in future and return them a profit. The most common kind of investment mortgage is the buy to let mortgage, which allows someone to purchase a home and rent it out, with the income used to pay off the mortgage.

Buy to let mortgages are available from high street lenders, although their availability may go up and down depending on the financial climate. The traditional expectations will be that you are able to rent out the property for a fee large enough to cover mortgage repayments, associated costs, and then leave you with a reasonable profit.

Even with the housing market suffering, buy to let mortgages remain popular because the slump in sales means more people are looking to rent rather than buy. This means there is a market at which to aim your rented property. Just as with other types of mortgages, lenders will carefully examine any application before approving a loan. Generally speaking a bank manager will expect to see you buy property which is expected to go up in value rather than down. The bank’s expectations of the property are not just designed to protect themselves as if you default on the loan, they suffer. Therefore it is in their interests to make sure you are taking on property investment mortgages which suit you.

Some providers will even ask that you do not market the house privately, but use a professional estate agent. This can even be part of the conditions of getting the loan. Other common conditions include that a landlord does not rent the house to someone who is receiving state support and does not have a job. This might seem extreme and even somewhat intrusive, but again is really only designed to ensure the risk of you falling behind with repayments is minimised. Someone who has a very low income may fall behind with the rent quite quickly, and no rent means less money to pay back the mortgage.

Note that a big deposit will normally be required for property investment mortgages, normally about a quarter of the value of the property. These mortgages are also different to traditional home loans in that they involve working out all the added extras. For example, owning a property which you rent carried responsibilities and you will be expected to pay out towards maintenance costs, you will also need a buildings insurance policy, and there are tax implications. Even if you are only buying a home to do it up and sell it on, you need to think carefully about how you intend to fund any improvements before putting it back on the market. As with other loans - you will have the usual options of fixed interest rates, capped interest rates, and variable rates, among others - the main thing could be to ensure you balance existing commitments with your new investment venture.

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