Interest only buy to let mortgages
|1.95%||4.50%||60%||£2273||Tracker||28 months||Get a quote|
|1.99%||4.99%||60%||£2813||Tracker||28 months||Get a quote|
|2.04%||4.84%||60%||£2710||Tracker||26 months||Get a quote|
Important: Lender fee is calculated based on a loan amount of £100,000.
The overall cost for comparison on a Buy to Let Mortgage is 5.2% APR
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
*Some lenders offer mortgages with no fees, however, on these mortgages a broker fee will still apply. We charge a £999 fee for our buy to let mortgage service and £999 or 1% of loan value (whichever is greater) for our bridging loan and commercial mortgage service. This is payable only on completion.
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What does interest only mean?
If you choose an interest only BTL mortgage you will only have to pay the interest on the loan. This means your monthly payments will be cheaper but you will not be paying off the capital of the loan. Therefore once your mortgage term comes to an end you will still owe the full amount you originally borrowed (unless you make overpayments during the term).
The benefits of interest only mortgages
- Cheaper repayments and less chance of getting into mortgage arrears
- Long-term depreciation in value of your debt
- Flexibility to make overpayments to reduce the capital with security of low minimum payments when they're all you can afford
- Reduced tax for buy to let investors
Payments on an interest only buy to let mortgage will be cheaper than if you opt for a repayment buy to let mortgage. However, this could be seen as a double-edged sword. At the end of the mortgage term, the original balance of your loan will still be outstanding.
For a landlord, it can be attractive to opt for an interest only BTL mortgage, as the rental income will easily cover the monthly payments, giving you extra income. You can then use this money to build your portfolio, invest it elsewhere, pay off your residential mortgage, send your kids to university or, buy a nicer car… It is your money and you can do whatever you like with it.
However, it is always a good idea to have some easily accessible cash for a 'rainy day'. Remember, your tenants will expect to have repairs carried out in a timely manner, and unfortunately, things like boilers, cookers and showers can break down at the most inopportune moments. Having that little fund of 'rainy day' money can come in very handy.
All borrowings (including mortgages) taken out in order to fund your BTL business can have the interest portion deducted from the income generated by the property before tax becomes payable. As tax can be deducted in this way, an interest only mortgage can be an attractive option for a landlord looking to minimize their tax bill. It is also important to note that the interest payable on a repayment mortgage is also eligible for this kind of tax deduction, but the capital payments are not. We recommend that you talk to an accountant who specializes in property investments for more accurate information tailored to your circumstances.
An interest only mortgage can be a more flexible way of borrowing as you can choose to 'overpay' the repayments if you wish (though check with your lender if there are any caps or penalties for doing this). By overpaying each month, you will clear the debt sooner, increasing your equity in the property at a faster rate. This is not quite the same as a repayment mortgage, because if you do have a 'rainy day' you could choose not to overpay for that particular month, or months (choosing instead to pay just the interest only portion as agreed by your lender). This offers you much more flexibility.
For a free quote from our qualified consultants please submit your details via our online quote form or call us free on the telephone number at the top of this page.