A 'buy to let' mortgage is a type of mortgage for landlords who plan to purchase a property or portfolio of properties for subsequent letting.

Essentially the workings of a buy to let mortgage are the same as that of a home owner mortgage.

The allowable size of the loan and the interest rate will be influenced by the level of risk perceived by the mortgage lender.

The type of tenant is a significant driver here, you will pay more if you plan to let to students than if you plan to let to professional married couples.

Buy-to-let mortgage lenders will also consider the potential rental income from the property and not the applicants' income when making their decision about a loan.

Generally speaking your rental income needs to be at least 130% of the mortgage repayment and provide an annual yield of more than 8% of the mortgage if you want to be sure of getting approved. You may still get a mortgage if your numbers are less than this but you will be working with only a few select lenders.

So why buy to let?

In July 2006 results from two UK surveys showed that 1 in 6 loans were being granted for buy to let purposes. This was at a time when returns from residential lettings were at their lowest for many years. This is as a result of rents not keeping pace with property prices. The average rental yield is now quoted to be about 6% but with some significant regional and local variations. However, leading buy to let lender Paragon is quoting an average return on investment of 11.4% over the 12 month period.

Paragon also state that a survey of landlords indicates that investors expect to grow their portfolios in numerical terms by 6% over the next 12 months.

The general opinion is that letting has to be considered as a medium to long term investment. The days of the 'quick buck' are gone. It is also essential that buy to let investors look carefully at the local property markets to see which areas are 'on the up' and invest accordingly. It goes without saying that a poor choice of property can be a very costly experience.

Our Service To You.

At Turney & Associates Ltd. we try to make life easy for our buy to let clients. We will source competitive buy to let mortgages and provide you with a decision in principle within an hour. When trying to buy suitable buy to let properties you need answers quickly and we endeavour to do our best to provide those answers.

• Call us now on 01223 329666 to discuss your requirements.