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Buy to Let Mortgages
To Let or Not To Let Mortgages
Buying to-let mortgages can be a great opportunity for the savvy investor. Ideally, an investor will buy a property with a low property value and let it out to responsible tenants. The tenants can pay in part or in whole the amount of the mortgage on the property. The investor, now a landlord, then accumulates equity, and, as the property value increases, the investor makes money on the property while the mortgage is being paid off by the tenants. For someone with some extra capital, buy to let mortgages can increase wealth rapidly and with little monetary risk.
But if something sounds too good to be true, it may be. There are some potential drawbacks to the to-let mortgage both for an individual and for the population as a whole. A danger in renting properties is that the tenants that you are letting the property to have no interest its long-term value. Irresponsible tenants can create major headaches for any landlord, whether it be because of late or missed payments, damages to the property, or a lack of care for the property. It is extremely important that an investor knows and trusts the tenants that the property is being rented out to.
Secondly, there is no guarantee that the property value will increase and as we have seen it can even fall, particularly in the short term. Generally, real estate is a very safe bet as a long-term investment. However, as we have seen with the recent mass-foreclosures in the UK and the United States, a sudden shock to the financial world can send property values spiralling downward, leaving the owners of the property under considerable financial stress.
Finally, despite the recent upsets UK to-let mortgages are still a growing trend. A result of this trend could be a situation where the rich get richer and the poor stay poor. If properties are being bought up by a certain percentage of the upper class in British society, the middle class will have less of a chance to buy property. Property values can be driven up by those who can afford to pay a bit extra for a property, leaving a middle-class family looking elsewhere or possibly renting instead of buying. Without property and equity, these middle-class families have less opportunity to gain wealth.
The success of to-let mortgages depends upon the investors' and British society's responsibility. Not only must responsibility be shown to who rents these to let properties, but also to the breadth of the to-let mortgage industry.