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Buy To Let Rates - Important Information about Buy to Let Rates - The Basics, Other terms to understand

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Understanding buy to let rates can be a bit of a hassle. The rates are always changing, and they depend entirely on what is going on in markets around the world. For first time landlords, learning about buy to let rates will take quite a bit of research and time. However, these simple tips about buy to let rates will help you understand the market quickly.

The Basics

One of the first things landlords should understand about buy to let rates is the fact that the loans are meant for homes that they will let. This is entirely different than the loans you would get for a home that you intend to live in yourself. Usually the amount of the loan you can get will depend on how much you expect your tenants to pay for rent.

It is also important to understand the difference between fixed and variable rates. Fixed buy to let rates will not change for the entire life of the loan, while variable rates will change as the national interest rate goes up and down. Also buy to let rates typically start at one amount and then change to a different percentage. This is basically an introductory rate that reverts to the lender’s standard rate, so it is important to check both numbers. Usually lenders also publish an APR cost, which is the basic overall cost of the loan. This percentage is not the actual interest rate you will receive, but rather a comparison rate to make it easier to understand how the buy to let rates will differ from company to company.

Other terms to understand

Another thing to look for when searching buy to let rates is the max LTV, or maximum loan to value. This number is the percentage which shows the ratio of the size of the loan to the property value. Different loans will have different max LTVs.

Prospective landlords should also make sure to ask each lender about the fees they charge. Different lenders charge fees for different things, and these fees can be a few hundred pounds or up to a thousand pounds or even more.

Before a landlord goes to speak to a lender about a buy to let mortgage, they should plan how much they plan to receive for each month’s rent. However, he should also remember that most rental properties are not let for the full 12 months each year. The best rule of thumb is to plan for the property to be let for nine months out of a year. This is especially true of the first year. Landlords who do not plan for at least three months of having an empty property often end up with higher buy to let rates and mortgages than they can afford. Also it is important to find a property that can be purchased for an amount and with buy to let rates that will result in a lower monthly mortgage payment than the amount the tenants pay each month. Try to factor out the entire year’s payments for nine months of the property being occupied. Compare that to twelve months of mortgage payments to see if you come out on top before signing on the dotted line.

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