Cheapest Buy to Let Mortgage

In the UK, there is a device called the buy to let mortgage.  It is exactly what it sounds like.  To the best of my knowledge, there is no such thing as a buy to let mortgage in the United States, which isn't to say that you can't buy to let or even get a mortgage to buy to let, it's just to say there isn't a specific type of mortgage designed specifically for you.  So what exactly is a buy to let mortgage?

Buy to let mortgages are designed for people who are buying a property specifically so they can make money off of renting it out to tenants.  If you buy this property, naturally, you need to get a mortgage, but there are different standards placed upon the buy-to-let crowd than there are on the buy-to-live crowd, because there are different standards in terms of credit worthiness.  Typically, the cheapest buy to let mortgage deals are still more expensive than the same deals for buy to live folks, because buy to let is seen as a greater credit risk.  If you think about this, it makes a decent amount of sense.  Those living in a home are more likely to pay off because they'll be facing eviction if they don't, whereas renters are known for being somewhat less reliable in terms of paying off their bills.  Since the owner of the building is likely to use some of that rent to make payments on the house, if the renters default, the owner may have to default as well.  For that reason, there are a few guidelines put into place in even the cheapest buy to let mortgage deals. 

First and foremost, the owner has to have good credit.  You will not get a buy to let mortgage with bad credit, because banks are already more nervous about the buy to let anyway, because it will be based in part at least on the dependability of the tenants, whom they have less control over.  It seems like all of this could be solved with the bank imposing certain restrictions on who is allowed to live in the house in terms of creditworthiness.  Anyway, I guess that's not really the point.  What is the point is that, on top of that, your rent income as a landlord will have to be a certain percentage more over the mortgage payments per year.  Which is to say that you won't be able to go beneath a certain number for the rent by the terms of your contract.  The reason for that is because the bank expects you not to get the exact amount you expect for rent for the entire year for a number of reasons.  First of all, some of the time that the apartment or home is sitting there, it will likely have a few of its rooms empty, without tenants and without any money coming in.  Additionally, there are likely to be certain property costs in terms of maintenance, and you will generally want to get some sort of income coming in as well, meaning the bank will expect you to charge a certain amount for rent in comparison to the yearly payments. 

There are a number of tax advantages that make the cheapest buy to let mortgages totally worth getting, and these are generally deductions and write-offs that make it possible to not pay taxes on certain rental incomes as long as it goes to the interest portion of the mortgage, which is kind of a nice feature.  That said, the even the cheapest buy to let mortgages are going to be difficult to get right now, because the economy is in the crapper.  These were great deals to have back in the time of the boom, but now, the deals generally are going to have higher interest rates and higher fees, just because this deal is seen as less creditworthy than the purchase of a home buy an actual home-buyer.  If you can afford it, the cheapest buy to let mortgage deals will be worth it simply in regards to the likely rise in value of property as we get out of the recession, but most investors don't have the kind of money right now to pay the extra fees and interest involved in even the cheapest buy to let mortgages.