If you’ve been on Google looking for investment property, you might have come across the phrase buy to let mortgages or buy-to-let mortgages. What is a buy to let mortgage? Is it even worth knowing about as a property investor?
Buy to let mortgages are mortgages that are specifically designed for investors to borrow money to purchase property that they intend to rent out to tenants.
The mortgage rates for buy to let mortgages are determined by a number of factors.
How are mortgage rates determined on a buy-to-let mortgage?
1. Rental valuation determes mortgage rate
The mortgage rates and the amount that can be borrowed on buy to let mortgages is usually decided by a the rental valuation. Typically, income from the rental has to cover up to 150% of the mortgage repayments. The surplus on the mortgage rate covers additional property costs such as maintenance and spaces of non-occupancy by a renter.
2. Salary of borrower determines mortgage rate
Some bank lenders determine the mortgage rates of buy to let mortgages by multiplying the salary of the borrower by three times (salary x 3) and adding half of the rental income of the property.
3. Loan commitments determine mortgage rate
Sometimes, the mortgage rate for buy to let (BTL) mortgages is determined by a somewhat complicated formula, involving the amount of salary, or income, of the borrower, the existing loan commitments of the borrower, and a deduction rule rule of annual mortgage payments.
Buy to Let mortgages current status
Recent credit problems that have affected banking and the private sector as well have led some investors to maintain the same percentage of equity in the property in order to protect themselves, in the situation that prices decline so quickly that they find themselves in a mortgage wherein the mortgage loan value is worth more than the existing property value.
Did buy to let mortgages cause the banks to crash
As banks encouraged lending, offering low and affordable mortgage rates, often with little or no due diligence as to whether the borrower had the ability to repay, buy to let mortgages grew in popularity. By 2007, the banks began to engage in wholesale lending of the buy to let mortgages, repackaging mortgage securities and selling them to investors at a higher price. In doing this, the banks raised capital, but ultimately, these financial instruments were completely worthless. In 2008 and 2009, a number of buy to let lenders who had engaged in these fraudulent practices, collapsed. However, because buy to let loans were so cheap at this point, they became more affordable than a standard mortgage.
Buy to let mortgages today
Due to the economic downturn, whatever that means, more like an economic meltdown since the Federal Reserve manufactures money out of printing money, essentially making it worthless, then devaluing it by printing more money and putting it in a giant hose and spraying it to banks who lend out fake loans that are actually promissory notes, wherein the lender has to pay back real money with interest, or lose or have liens put on items of value (car, house, whatever), buy to let mortgages have become less popular with lenders.
Videos about the Federal Reserve and how the entire economy of the United States will probably collapse.
Senators speak out about the Fed
Senators speak out about the Fed, 2
The Federal Reserve: We don’t have to tell you where the money went.
Money, money, money: It’s all fake. We are done.
Some banks, financial institutions, however, still offer buy to let mortgages. Generally, though, they charge 25% deposit to the table, or more.
Are buy to let mortgages necessary for the investor
Is a buy to let mortgage necessary for a lender, when considering the purchase of an investment property? Probably not.
Due to the real estate market being in a downturn, affordable properties for investors are available. Often, the property owners will adjust financing interest rates for purchasing the property, and be flexible in terms of the down payment.
An investor who is educated as to the area of the investment property, the condition of the investment property, and who has qualified tenants with a stable income history, as well as an exit strategy in case of unforeseen circumstances, will be able to profit from real estate investing despite mortgage rates and without having to jump through hoops and lengthy application forms that come attached with buy to let mortgage applications.
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