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Buy to let Mortgages allow the borrower a first charge loan using an investment residential property as security.
The buy to let mortgage is set-up so that the property is tenanted out and the mortgage payments are covered by the rent generated by the tenant within the security.
A HMO Mortgage is a conventional buy to let mortgage taken over a security that has multiple tenants. It is referred to as a House of Multiple Occupancy i.e. shared bathing and kitchen facilities. A Holiday Let mortgage is a conventional buy to let mortgage on a security that has long-term tenancy restrictions.
A portfolio mortgage straddles the border between buy to let lending and commercial mortgages as a loan over multiple properties. In a buy to let form this will take individual loan charges against each property whereas in commercial form a single loan facility can stretch over multiple properties. The former tends to be interest only, the latter amortising.
The two main forms of buy to let products are:
- Interest only products
- Capital and interest repayment products
A buy to let mortgage provider will lend to a set percentage of the purchase price of the property and this is generally at the top end (Loan to Value) of alternate forms of finance – as of late 2016 the highest LTV’s available are 75-80%.
As a long-term product the rates often tend to be very competitive and the borrower is provided with a choice of a fixed or variable rate product. A fixed rate product allows the borrower to plan monthly expenditure; a variable rate product holds the advantage of a potentially decreasing monthly payment.