Up till the end of the nineties, buy to let mortgages offered rates of interest that were significantly higher than owner-occupier mortgages, often charging a premium of more than one percent.

Today's mortgage market contains a large number of special products that are aimed specifically at the buy-to-let market. These mortgages do not differ vastly from other mortgages - you can usually find discounted, fixed, capped and base rate tracker buy-to-let mortgage rates. Although you may still not get such heavy discounts and introductory offers as you would with owner-occupier mortgages, but at least the Standard Variable Rate is usually more or less comparable.

However, there are three key differences in comparison to standard mortgages:

• The biggest single difference between a buy to let mortgage and homeowner mortgage is the maximum proportion of the property value that the lender will advance. Almost without exception, you will have to pay a larger deposit on a buy to let property. The minimum deposit is usually 15 percent, but some of the more competitive deals will only be open to those with larger deposits, often as large as 25 percent. Therefore, this type of investment is only viable if you have the necessary deposit as well as the funds to cover your mortgage payments during void periods, maintenance of the property and other miscellaneous costs, realistically putting it well out of the reach of many people.
• Although the gap has narrowed, buy-to-let mortgage rates are not normally quite as competitive as homeowner mortgages. Since you are not paying back the mortgage directly to the lender and will probably be relying on your tenants to pay their rent, the lenders see buy-to-let mortgages as more risky than other types of home loans. This means that you have to pay a higher rate to compensate them for the higher level of risk.
• Lenders will normally incorporate a proportion of the rental income when calculating how much money they are willing to lend you. Unlike the lending criteria for other mortgages, where the lender may stick fairly rigidly to the income multiples that they use, this allows you to purchase property beyond your normal price range - provided that you can raise the deposit. You should still be slightly wary of over-stretching yourself though - remember that you cannot guarantee you will always have tenants in the property, and if it is vacant, you will have to foot the mortgage bill on your own.
• A secondary criteria is that most lenders set the amount by which they expect rental income to exceed your monthly repayments. This usually ranges from 125 percent to 140 percent and will normally be verified using some form of independent market valuation or letting appraisal. This is so to ensure that the rental income covers the mortgage and all of the other running costs such as agents fees, insurance, void periods and so on.

Two final points as regards the features of buy to let mortgages:

Watch out for hefty redemption penalties that exist on some buy to let mortgages - typically six months interest for the first 3 years.

Remember that when you sell the property, you are normally going to be liable for Capital Gains Tax at your highest rate of income tax, so you should arrange for a good accountant or specialist advisor in making sure you address this, and all of the other tax issues, as effectively as possible.