Understanding Buy to Let Mortgages
Buy to let mortgages are a lot like mortgages on homes, with a few key differences, of course. For instance, a buy to let mortgage is evaluated mainly on the rent charged by the owner, which is usually 125% of the loan payment. Many lenders sanction buy to let mortgages only once you have met their minimum salary requirement so that they are convinced that mortgage payments can be met by the customer even during the periods when you have no tenants. The main difference between buy to let mortgages and regular mortgages is that the former is taken out with the intention of letting the property out on rent in order to earn income.
Higher Interest Rates and Deposits on Buy to Let Mortgages
The rates of interest associated with buy to let mortgages are usually quite high in comparison with regular mortgages for your home. Even the initial deposit can be significantly higher than regular mortgages. In case of a regular mortgage, customers can get deals that need a 10% deposit, but the minimum for buy to let mortgages is 20%. However, similar to regular mortgages, financial institutions provide the best rates to borrowers who have the ability to shell out deposits of 30-40%.
Age Requirements and Fees for Buy to Let Mortgages
The arrangement fees associated with buy to let mortgages are usually higher than those linked with regular home mortgages. For instance, the fees may range between AED 500 and AED 1750 for a loan worth AED 50,000. Since the difference between regular mortgages and buy to let mortgages can be quite high, customers are recommended to look around and consult advisors before making a final selection decision, because there may be cases where mortgages with lower rates end up being costlier if higher arrangement fees are to be paid.
While regular mortgages are seldom sanctioned to customers who have past their retirement age, the case with buy to let mortgage isn’t so. An individual beyond his/her retirement age can apply for buy to let mortgages as they are usually calculated with the rental income the customer receives. However, the customer must also provide proof that he/she can make repayments regularly even when the property is not being used by tenants.
Buy to let mortgages are viewed as property investments as customers can either make money, or lose it over a period of time. Make sure you consult an experienced advisor to have a better chance of making profit on a buy to let mortgage.