A buy-to-let mortgage is a loan you take out
to buy a property which you intend to rent to
tenants.

It is a long-term investment that you hope
will generate an income from rent and a
capital gain when you sell the property.

Typically you can borrow up to 85% of the property value. The maximum you can borrow is usually
linked to the amount of rental income you
might expect to receive.

For example, a lender might require the projected rental income to be 30% higher than your mortgage payment.

You can have either a repayment or an
interest-only mortgage.

There are a variety of rate options, e.g. fixed, discounted, tracker.

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Let To Buy - some points

A "Let To Buy" mortgage works by allowing you to borrow money to buy a new home to move into while your existing residence is let out to tenants.

It's a way to retain your original property as an investment and benefit from the mortgage being paid by the tenants.

"Let To Buy" can be a stepping stone to building a portfolio of property that you could reap dividend on in the future, acting like a form of long term pension provision, once the mortgage on the property is paid off.

The rules are different from "Buy To Let" as you may be able to borrow a higher proportion of the property value, which means you may need a smaller deposit or if you have plenty of equity in your current property possibly no deposit is required at all.

It is a requirement by mortgage lenders that you ask for their permission to Let To Buy.

Also you must inform your building and contents insurer.

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Very few buy-to-let mortgages are regulated by the Financial Services Authority. This means that you may not be able to take complaints about this type
of mortgage to the Financial Ombudsman Service. You are also unlikely to be able to seek redress from the Financial Services
Compensation Scheme if the firm against which
you have a complaint becomes insolvent.

FSA Factsheet

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