Buy To Let – Interest Only
As the name suggest, if you choose the interest only option you will only be paying the interest on the mortgage and not repaying any capital. The reason why people choose to go down this route is because there is a lot less risk when you are renting out the property. A 12-month tenancy agreement will bring you in a rental income which will cover you for potentially up to 36 months’ of interest-only mortgage payments. The obvious down-side to this is that you would not be paying off the capital for the property.
Most Buy-to-Let mortgages are not regulated by the Financial Conduct Authority
Buy To Let – Capital Repayment
A capital repayment Buy To Let mortgage would mean that you pay off the entirety of the property during the mortgage term. For instance, if you took a £250,000 mortgage on a capital repayment basis, you’d owe nothing once your mortgage term finishes. This is providing you’ve kept up with your payments.
In comparison, if you took the same mortgage on interest-only, you’d still owe the lender £250,000 at the end of your mortgage term.
Although these aren’t the standard Buy To Let go-to, Buy To Let repayment mortgages are popular with those wanting to boost their income in retirement.
If you own a Buy To Let outright, the rental income received will be all yours. Furthermore, if you sold the property towards the end of the term, you’re likely to make a capital gain.
