Buy to let mortgages guide
Are you considering diversifying your income through a buy to let purchase? If so, one of the most important things to consider is what the right strategy to repay the loan is. Check out our buy to let mortgages guide.
Currently, there are two main options. Interest only buy to let mortgages and repayment buy to let mortgages. First gives you an option to pay interest on the loan only and at the same time, there would be no repayment on capital. The other allows for a regular payment based on interest and original loan amount to be paid on a monthly basis. These are the basic principles but let’s break it down even further.
Interest-only buy to let mortgage
When it comes to interest-only mortgages, payments made each month will only cover the interest on the amount borrowed. Therefore, when the mortgage term ends, the property owner will need to pay back the full amount originally borrowed. Interest-only mortgages are particularly popular among landlords due to their low monthly payments. Many landlords are opting to sell the property at the end of the term to pay off the capital balance of the original loan.
Repayment buy to let mortgage
In case of repayment mortgages, your monthly payments will be higher in comparison to an interest-only mortgage. The reason is that the monthly payment is made up of interest on the loan and a portion of the amount that you borrowed. As a result, you will be a full owner of the property at the end of the repayment term because you’ll have paid off both the loan and the interest.
Important things to keep in mind
It is also important to consider that since you will be renting the property, and therefore generating income, you will be, in essence, operating a business. This means you also need to consider that house prices can fluctuate, interest rates can rise, and there are taxes to apply. All of which you should take into account when deciding to become a landlord. You might want to consider consulting with an experienced broker to help you make the right decision to invest.
However, regardless whether you’re a first-time landlord, or you’re an experienced one, you will want to get the most suitable buy to let mortgage deal possible! You can check out some of the deals currently on offer by Best Buy to Let mortgage brokers. You can also try out one of our calculators to find out how much you may be able to borrow. Whatever you need we are here to help you find the most suitable deal tailored to your needs.
Your home may be repossessed if you do not keep up repayments on your mortgage.