Buy-to-let is a British phrase referring to the process of buying property so it can be let (rented) out. A buy-to-let mortgage is a loan specifically designed for this purpose. The properties, be they houses, flats, bungalows, or hotels are normally residential. This has been available in the UK since 1996.
This arrangement has many benefits for landlords like a stable income from rental receipts, an accumulation of wealth if property prices increase in the long term. Rising house prices in the UK have made buy-to-let a great way to achieve a great return on investment.
Even though there are many benefits, there are also risks, the main one is that landlords take-up leveraged speculation positions then the landlord takes out a loan to buy the property. Naturally they expect that the property price will increase and can be sold for a higher price later on. Sometimes the opposite happens forcing the landlord into negative equity. In the worst case scenario the landlord can't meet the payments of their mortgage and then the bank could try to take possession of the property and sell it to regain the loaned money.
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