Summary

Buy-to-let mortgages have been over-achieving all year, now theyre doing so well that mortgage companies are making their criteria more flexible to encourage even more investors. This article looks at the bigger picture.

Buy to Let Mortgages - where the smart money is

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Both rental incomes and rental yield (income expressed as a percentage of the value of the property) increased between October and December 2005, by 3.3% and 0.03%. A report carried out by the Council of Mortgage Lenders (CML) report also reveals that ( cheap mortgages ) the value of new buy-to-let mortgages were a massive 50% more in the second half of the year than they were in the first. The number of buy-to-let mortgages arranged also increased, by almost 40%.

Its looking very good for 2006 so far - the situation as it stands at the moment means that many potential first time buyers are being priced out of the market, so rental conditions are healthy.

Mortgage lenders are really cashing in on the buy-to-let boom. The CML has found that the percentage of buy-to-let mortgages in arrears is less than the percentage of homeowner mortgages in arrears, not only that but the percentage is ( life insurance quotations ) decreasing on buy-to-lets, whereas its growing on homeowners. So the mortgage companies are starting to realise that buy-to-let mortgages are a safer bet, which is why theyre now actively promoting them for the first time. They have also relaxed their previously very strict criteria, so they are more accessible than they ever have been before.

The way it has always worked is that to get a buy-to-let mortgage, your rent income should comfortable exceed the mortgage payments, usually by an extra third. A ( cheap loans ) mortgage of £900 would require a rental income of £1200. However, these tight rules are being relaxed, firstly because of the rise in property value, which is making it harder for landlords to reinvest, and also because house prices have been increasing at a faster rate than rent prices, so the sums just havent been adding up. (travel insurance)

A number of mortgage lenders ask for the rental income to be 25% more ( life insurance advisers ) than the mortgage now, but a notable few, including Northern Rock, are arranging buy-to-let mortgages where the rental income and the mortgage are virtually the same.

The LTV ratio that mortgage lenders set is also relaxing - traditionally the landlord would have to pay a 25% deposit, but it is now coming more commonplace for lenders to request just 15%. Northern Rock have a mortgage which only asks for 13%, and GMAC have an 11% deal.

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