Buy to let mortgages lenders separate regular mortgages from the buy to let types because there is more risk. As such the interest rates are slightly higher than a normal mortgage. There are a couple of different ways that lenders decide how much to lend. Mortgage payments need to be based on more than just the credit score of the applicant.

The evaluation of the property decides the total amount needed for some lenders. Part of the decision on lending is based upon the amount of rent individuals pay (totaled yearly). These amounts are anywhere from 120% to 150% of the total mortgage payments in a year. If the property value is deemed to be 100,000 pounds, the total mortgage for the year, at 5%, would be 5,000. The rent, therefore, would need to total at least 6,000 to 7,500 pounds.

A lender for buy to let mortgages can gauge the amount lent by multiplying your total salary by 3 and adding the rental totals divided by 2. So if your salary is 25,000 pounds a year and the income for the rental property would equal 7,500 pounds the total amount lent would be configured like this: 25,000×3 + 7500/2 = total amount lent (or 78,750 pounds).

More often a lender for buy to let mortgages will consider your current debt as well as your salary. They’ll configure the amount owed by figuring your total debt, subtracting that from your salary and then multiplying that by 3.5. So if you earn, for example, 30,000, your current mortgages and loans = 10,000 pounds that would be subtracted; so 30,000 – 10,000 = 20,000 x 3.5 = 70,000.

Every lender has their own method of deciding the amount of the loan and the interest rate that applies. It’s not a good idea to apply at several lenders, rather get the information directly from several lenders and make a decision with whom you wish to apply.

The benefits of property ownership in a let to buy mortgage are numerous. The most important being a tax break. While a general salary from a rental property has a 20-40% tax rate, generally a portion of those taxes can be reduced by deducting things like maintenance and interest payments. Another great benefit is the passive income that can eventually be had if you have several properties and a property management company.

A buy to let mortgage is definitely a positive step towards a passive income.

If you don’t want to put it all on red and hope for good luck then you might want to take a look at strategies that have a long track record of performing well.  The beginning of any successful mutual fund investing strategy is to look at fees.  In the mutual fund world there are load and no-load funds.  We are only looking at the best no load mutual funds.  By only looking at no-load funds we are skipping the high commission brokerage funds that almost always underperform over the long run due to fees.

Now that we have narrowed our universe to only no-load funds lets look at the actual strategies.  The first successful mutual fund strategy that is not based on luck is that of in depth research.  You want to find funds that have had the same manager for several years and that have a good long term track record.  When researching the fund manager you will want to make sure that not only has the manager posted good returns but that the manager has a legitimate investment methodology. If he claims to be a value manager does he actually buy value stocks?  Or does he just go buy things that have been beaten down?  Take a look at Bill Miller at Legg Mason.  He beat the SP500 for 15 years straight and then basically blew up by doubling down on junk like Fannie Mae, Bear Stearns, Lehman Brothers, and AIG.  These are all companies that were not value but instead were beaten down junk.  By chasing losers he was setting his investors up for a return of -70% in 2008.  Instead you want a manager like Bruce Berkowitz at Fairholme Funds.  Not that you should go buy his fund but he is a good model to emulate in that he does the same thing over and over as well as managing risk in a reasonable way.  He does extensive research buying stocks that he understands and is able to value.  Seat of the pants is not a successful investment method.

Another investment strategy that has a long record of success is that of momentum investing.  Some people call it chasing performance but when done in a methodical way it is a very powerful performer over the long run.  There is a lot of academic research behind this approach and the basic idea is that you buy the resent winner and then switch out when the start slowing down.  You will never buy the bottom and sell the top but over time you do well.  One strategy that has done well over the years is to take the top 5 Fidelity select sector funds based on the previous 12 months performance and then at the start of each month rotate into the top 5 again.  This is one simple method that has done well over time.  Not perfect but it has done well.

Likely the best strategy is to do a bit of both of these basic approaches.  By diversifying strategies as well as diversifying the actual mutual funds you will be in a better position to outperform over time and take less risk.  How much diversification is enough?  Most people agree that if you can split your money into the 5 or 10 best mutual funds you are in good shape.  By using solid strategies you can find the best mutual funds to invest in.