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 amortizing.

The two main forms of buy to let products are:

Interest only products
These are generally arranged for between 15 – 40 years although almost none of them will be taken to term. Once a product’s initial 1-5 year ‘special rate’ expires the borrower will generally refinance onto a better deal with another incentive rate or period.

Capital and interest repayment products
This form is available (and often mandatory for commercial loans) which will eventually allow the mortgage to be repaid in full. Terms tend to vary from 10 –25 years with the shorter the term, the higher the monthly payments (and the higher the rent roll required for any given loan).

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 – typically 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.

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