Interest Only Buy To Let Mortgage

The markets are doing an about turn and property investors are looking at ways to reign in the costs, such as an interest only buy to let mortgage. While property investors made around £80,000 profit on the sale of their properties in 2018, these figures were down from the year before. Investors generally had the properties for ten years before selling them off and those in London were likely to make three times this figure thanks to the property price explosion. With the market producing lower-than-expected property investors are swapping their capital gains strategy for an average yield one.

Interest Only Buy To Let Mortgage Becomes More Appealing

Investors are no longer looking for the quickest way to pay off their mortgage, but rather the means to ease up their cash flow as they look to renters as part of their investment strategy. The rental market is hotting up and this drives up the rental prices, which is a favourable outcome for a landlord. By freeing up their cash flow, landlords are in a better position to service their mortgage, even though the costs and interest rates are a little higher. Those who have a lump sum to settle the mortgage at the end will find this product convenient.

A repayment mortgage is a great option for those who don’t have the means to settle the loan at the end of the term. It allows the landlord to pay off the interest and the capital outstanding in manageable monthly payments. This also happens to be the most popular loan choice for homeowners and buy to let investors alike.

Buy To Let Interest Only Loans

Market research reveals that the interest only buy to let mortgage market has almost doubled from 102 interest only loans in 2013 to 193 in 2019. For investors, this opens up a whole new world of finance options. While there are so many loans on offer, research also reveals that the approval rate on these loan types is not that high. Landlords need to tick quite a few boxes in order to qualify, and this can make it a less attractive option for some. Those who happen to qualify, however, have an opportunity to save on their monthly instalment and only have to worry about the capital balance at the end. This works well for those who have a lump sum of cash available but don’t necessarily want to use it as a deposit in the event that the markets do an about-turn and their cash is lost should the property drop in value. From 2013 to 2018, there was an almost 10% approval drop for buy to let interest only loans, which means that the lending criteria on this particular product are tightening up.

How To Qualify For An Interest Only Buy To Let Mortgage

While this is not exclusive to the interest only products, it’s imperative that investors keep a close eye on their credit score. This will be one of the first things lenders look at before granting a mortgage of any nature. An interest only buy to let mortgage does place the borrower under more pressure at the end of the term, which is why many lenders require that landlords put down a 50% deposit. The property itself also needs to be a viable investment choice and with that 50% deposit, it needs to open at least £200,000 in equity in the event that the investor needs to sell the property. Affordability also needs to be top of mind when applying for this loan type and lenders seldom look at incomes below the £50,000 mark.

Interest Only Buy To Let Mortgage Calculator

There are a number of things investors need to bear in mind before they take on something as lofty as a buy to let interest only mortgage, and the lump sum at the end of the term is just a small part of it. Another thing to consider is the cost of the purchase, along with all the taxes and costs that are part of the package.

For landords, one of the fastest ways to determine whether a purchase is viable is with an interest only buy to let mortgage calculator. With the help of a dedicated property professional from Pro Buy To Let, investors can make their calculations and determine whether the investment is worth their time and effort. The interest only buy to let mortgage calculator will point out stress factors such as deposit required, repayments, lump sum payment at the end of the term, possible taxes and fees, and even whether the rental income is worth the investor’s time and effort. Investors also need to consider the capital gains taxes applicable should they sell the property and this can be calculated ahead of time to, according to the prevailing tax rates.

Short Term Interest Only Loans For Investors

One of the things that can shake a landlord’s cash flow is unexpected repairs or maintenance issues. Lenders are now looking to make funding a little easier for landlords by offering a short term interest only loan to make the necessary improvements. While this is aimed at those landlords who are looking to make a quick sale, there can be benefits for those who want to have long-term tenants as well. What landlords will need to consider, however, is that there is a lump sum payable at the end of the short term loan as well. This type of finance is intended to assist landlords who have a healthy portfolio but due to the high deposit, may be experiencing a cash flow dilemma. It’s also a great option for those who have their cash tied up in long term deposits that may require a notice period.

Interest Only Buy To Let Mortgages Create A Strong Asset Class

The buy to let market wasn’t always as popular, as the ordinary man on the street didn’t think they had the means to purchase a property and become a landlord. The buy to let mortgage changed this and the property rental market is now a flourishing asset on its own, with landlords from all walks of life. The interest only buy to let mortgage frees up the investor’s cash flow significantly, not only because the installment is lower but also because the initial deposit they have to put down is relatively high. These lending products ensure that ordinary people have the means to secure property as an investment, not just institutions government.

The importance of buy to let mortgage products is paramount, as the UK faces one of the worst housing periods in its history. Hundreds of thousands of UK citizens find themselves homeless and the lack of rental properties is at the heart of the problem. With the right lending products, investors are more amiable to the landlord market despite high taxes and stamp duties. As more rental properties open up in the market, tenants will have no need to compete for property which means that a lot of pressure will be off the housing industry. With interest only buy to let mortgage products, ordinary people can make a difference to the housing crisis.

There are a number of benefits to becoming a landlord, and the chance of building up equity for a profitable resale is just part of it. Another, of course, is the opportunity to earn an income indefinitely which can be a boost to regular or even retirement income. Sign up with Pro Buy To Let to learn more about the interest only buy to let mortgage.