The basics of buying a mortgage are significantly different when looking for a second home than when considering taking out a mortgage on your own property. While many people's first port of call will be the lender who provided them with their own property's mortgage, this may not be the best option.
Buy to let mortgages can often be found through the various specialist lenders, who operate specifically to deal with landlords and these can often be much better at offering attractive deals than the average high street lender. Having said that, as the popularity of buy to let mortgage lending continues to grow, the major financial institutions are beginning to cotton on to the potential in the sector and so are now more likely to offer deals which are more competitive than in the past.
Despite this, for most people looking for buy to let mortgages, a good starting point will be the Association of Residential Letting Agents (ARLA), which operates a buy to let scheme supported by a network of lenders. This body will provide potential landlords with all the basic facts and knowledge that they need to ensure that they will comply with the various legal regulations and a large portion of the leg-work in finding a mortgage and finding tenants will be done through ARLA.
The majority of lenders will not allow a prospective landlord borrow more than 85 per cent of any property, but the most impressive deals can be found if a deposit of somewhere between 20 and 25 per cent of the purchase price can be set down. Lenders also consider the amount of money that can be made from the property being acquired, as a percentage of the mortgage payments.
It is usually the case that rental income needs to be between 130 and 150 per cent of the mortgage payment, so having a good - and realistic - idea of what returns you expect on a property is vital when searching out a buy to let mortgage.
