Find Interest only buy to let mortgages

Rate Reverting Rate
Lender Fee Product
1.64% then 5.79% Fixed for 26 months 5.79% 60% £2203 Fixed 26 months Enquire
1.65% then 5.99% Fixed for 63 months 5.99% 60% £2534 Fixed 27 months Enquire
1.77% then 4.99% Tracker for 27 months 4.99% 60% £1209 Tracker 28 months Enquire
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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).

Benefits of an interest only buy to let mortgage

  • 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.

To make interest only buy to let work you need an exit strategy

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.

Understanding tax relief on interest only mortgages

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.

Use this link for a  calculator to work out tax on buy to let income.

Will interest only allow you to plan for repairs and null periods?

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 btl 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.

Talk to our advisors by calling on the numbers above or submit your details online.

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