Buy-let mortgage that require landlords to hand over the entire monthly rental income to the lender are to be avoided, according to an industry adviser.
Many buy-let mortgage require rent cover of 125 per cent of the mortgage payment, meaning that landlords have a financial buffer if they run into difficulties.
However, according to Landlord Mortgages, there has been a recent trend towards approving buy-let mortgages without this provision.
A spokesman for the mortgage adviser said that any landlord who took out a 100 per cent buy-let mortgage on a property without an excess rent buffer was potentially running into a “financial trap”.
And he advised: “Landlords should always keep a 20 per cent reserve up their sleeve.”
In related news, increasing numbers of consumers are using the internet to research mortgage products, according to new research.
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