Find The Best Buy to Let Mortgage Rates and Deals
There was a time when there wasn’t much to choose from when it came to buy-to-let mortgages. It seemed that there were just two options – take it or leave it.
The rates weren’t very competitive and very few buy-to-let mortgages were on offer from providers.
But the mortgage market has changed greatly over the last few years and there are now six times as many buy-to-let mortgages than there were five years ago. This translates into almost three-quarters of a million such loans in operation today and the range of deals on offer are almost on a par with ordinary mortages.
If you are thinking of going down the buy-to-let route, there are a few factors you need to take into consideration.
Buy to Let Considerations
One of the first things you need to think about is whether to opt for a repayment or interest-only mortgage. There are a number of reasons to choose either and they’ll depend on your circumstances and what you are looking to get out of the property.
If, once the mortgage term ends, you would like to have the house or flat, paid for in full, then you should be looking at a repayment mortgage. Should you decide to go for an interest-only mortgage, you may have to sell the property at the end of the mortgage term if you haven’t got a separate means of paying it off.
Other factors which affect which type of buy-to-let mortgage you will need may depend on what you intend using to money from the rent for.
If you are going to be relying on the rent as a means of income to live on, an interest-only mortgage will serve your needs in this regard. The monthly repayments for an interest-only loan will be much lower than the monthly rental income, so this should provide with enough money left over.
If you aren’t relying on the rent for immediate income, but still want to take out an interest-only mortgage, you can use some of the rent for the interest payments and put what’s left toward eventually paying off the capital via a separate investment vehicle. You could also use the left over money for investing in other buy-to-let property.
It may also be a good idea to set aside some of the money you earn from the rent for the maintenance costs or times when no-one is living in the property. You could also find yourself forking out extra cash to have a tenant evicted if they don’t pay their rent.
You may have less cash in your pocket at the end of each month if you opt for a repayment mortgage, but the major plus is that you’ll own the property outright at the end of the term and won’t have to worry about finding another means of paying off the capital. As an investment, you’ll obviously have to wait a lot longer to see a return.
With an interest-only mortgage, you’ll have more wonga in your wallet each month and, if you are a serial investor, you can use the extra money for further investments. Paying off the capital can wait until the end of the term, but if you haven’t been running an alternative means of saving alongside your interest-only mortgage, you may have to put the property on the market to pay off the mortgage and this could put a big dent in your investment returns.
Buy to Let Mortgages – a terribly taxing issue
Interest-only mortgages trump repayment ones when it comes to tax. You’ll have to pay tax on rental income, but the interest payments on your mortgage can be deducted from this. But if you’re paying off the capital as well, those payments can’t be taken away from your rental income, meaning you’ll pay much more tax if you have a repayment mortgage.
With an interest-only mortgage, all of your monthly payment can be taken off the taxable amount of rental income. As was pointed out earlier, there are many more options available now for buy-to-let mortgages and lenders are a lot more flexible than before. Some offer mortgages which combine interest-only and repayment models, giving you the opportunity to receive some of the rental income should you need it, or allow it to go towards the repayment of the capital.
Such mortgages can be a bit more expensive than the more straightforward one and do require a fair degree of discipline from the borrower.
Buy-to-let mortgages are like any other, there are good deals to be had if you compare deals and shop around. You can also fall foul of high interest rates or punitive charges for early redemption, but there’s also the opportunity to switch lenders and deals every so often as you would do with any mortgage.
To find out how a buy-to-let mortgage works and discover where the best deals are, go to ePepi.com. You can also get excellent mortgage advice from out expert team on [mortgagenum].