Buying a property is one of the biggest financial commitments we are likely to make. This also applies to investment property. In most cases, we are not in a position to purchase a property upfront with cash and so a mortgage or buy to let mortgage is required.
What is the difference between a residential mortgage and a buy to let mortgage
With a residential mortgage, you will want to make sure that the mortgage is paid off at such a point when perhaps you are no longer working and need to eliminate that monthly repayment. There is also the security factor that you now own the property outright.
However, with investment property you will never need to live in those investment properties and therefore they should be utilized as an investment vehicle. There are plenty of books and buy to let guides available and the internet is a good source of information.
And so with a buy to let mortgage you are likely to keep the borrowings to their maximum at all times ensuring that you always have some cash funds available to cover any rental voids should they occur.
What is the difference between a mortgage and a loan
A residential mortgage or a buy to let mortgage is different to a standard loan. A mortgage generally enables you to borrow far more than a loan would. The criteria may vary from different mortgage lenders and products. But the key difference being that there can be additional charges including arrangement fees, telegraphic transfer fees, property valuation fees and other costs. However, many lenders can include these in their overall borrowings to you.
With the mortgage market becoming more competitive and with a much bigger selection of mortgage products available, it is important to do your research. There are plenty of both residential mortgage brokers and buy to let mortgage brokers that can help search the mortgage market place on your behalf. If you do get offered a cheap buy to let mortgage, make sure you read all the terms and conditions. Some products can offer very attractive rates to start with and then tie you in for a much longer period on a higher rate with heavy redemption penalties. Either way it is a very competitive market and different products are always coming on to the market. It is always worth looking around when you are coming out of a fixed or discounted mortgage product too because the cash savings you can benefit from by re-mortgaging can often far outweigh the set up costs involved in this exercise.
Re-Mortgaging
Many property investors re-mortgage their properties on a regular basis to ensure that they are maximising their return at all times. If you are looking into buying investment property make sure you do plenty of research first. Find out more about the different types of buy to let mortgages and how they can affect your profitability as a landlord. Once you find the best buy to let mortgage, you then need to make sure you are buying the right type of investment property.
Jennifer Tweed is the founder of buytolet4sale.com, one of the UK's first property portals dedicated to all types of investment property for sale and everything you should need for your sale and purchase. Learn more about buy to let.
