Did you ever ask what are buy to let mortgages? Well the answer is somewhat in the phrase itself. It basically involves purchasing or buying a property or house, with the sole intention not to live in it, but to let it or rent it out to someone else, and thus it will generate you an income. This income will hopefully cover the cost of the mortgage that have dependant upon this property, and then you can ideally make a profit on top of the mortgage repayment, from the income.
The eventual aim is to have an income without the mortgage, once you have repaid the buy to let mortgage, as well as the actual asset itself too.
In the late 90’s and early 00’s the buy to let mortgages business was booming, with house prices sky rocketing above a lot of peoples reach, and so many people on lower incomes were forced to rent in this economical climate. So demand for rental outstripped supply and landlords then bought more properties to let, so the house prices climbed further.
Obviously this climbing market cannot go on indefinitely, it was going to reach a peak, since money and earnings is not infinite, people can only afford to pay so much within their budgets each month. So the bubble burst, which is where we are at the moment, currently picking up the pieces of an overinflated market (like a balloon), and finding buy to let mortgages is a tricky task right now, you need a decent deposit at time of writing.
This deposit is required to offset an potential negative equity issue that the mortgage lender may come up against over the first few years in an unknown marketplace, so that by getting you to provide a deposit, it balances the potential negative equity for the lender and balances their risk in the buy to let mortgages that they are lending.
