Buy to Let Interest Only Mortgages
Our Buy to Let Interest Only Mortgage Service
Why choose us?
Fair Mortgages can provide you with a first class service if you are looking for buy to let mortgage advice.
Special features of what we offer include:
- Whole of market broker - we deal with most UK buy to let lenders
- Rates - Access to leading buy to let market rates
- Exclusives - Access to exclusive buy to let mortgage deals not available on the high street
- Our BTL expertise - Expert help whether you are a first time investor or experienced full time landlord
- Credit issues? - We have lenders who will take into account previous defaults and missed payments
- Experienced BTL investor? - Have a complex buy to let or have a portfolio of 5+ properties? - speak to us
To investigate your buy to let mortgage options, call our specialist team or fill in our call back form.
With an interest only buy to let mortgage deal, you only pay off the interest payments to the mortgage lender on a monthly basis. By doing this the monthly cost of borrowing is greatly reduced, as you are only making repayments on your interest owed, not on the mortgage loan itself. However, if you are considering an interest only mortgage for a rental property, it is essential to have a repayment strategy in place to ensure that you can pay off the mortgage capital when the term of the buy to let mortgage ends.
Interest only buy to let mortgages are popular among landlords, especially since the 2017 changes to the tax rules. From 2017, landlords can no longer deduct their entire expenses derived from their buy to let properties when calculating their profits. Securing an interest only mortgage may be a way of counter acting the effect of the 2017 tax rules.
Benefits of an interest only buy to let mortgage
There are several reasons why you might consider an interest only buy to let mortgage, some of which include:
- Lower repayments - The prospect of lower monthly payments, especially if you are unsure how much rent you will be charging, could be an appealing option and could make a buy to let mortgage more affordable in the short term.
- Potential extra cash - If your repayment vehicle does really well over the term of the buy to let mortgage, you could find that you can afford to pay off the capital with some extra cash left over.
Drawbacks of an interest only buy to let mortgage
While the monthly repayments you make on an interest only buy to let mortgage are likely to be lower than with a repayment mortgage, there are some potential disadvantages to be aware of:
- Lack of security – unlike a repayment buy to let mortgage, you have no guarantee that you will be able to pay off the mortgage balance at the end of the term
- The need for a bigger deposit – many lenders require a proportionally larger deposit for interest only mortgages
To compare top mortgage rates and find the best interest only mortgage deals for you, use the mortgage above calculator to search over 5,000 deals based on your personal circumstances.
From September 2017, further changes to how buy to let mortgages are regulated will be implemented that will make it more difficult for those looking to secure finance for buy to let properties.
Review of the entire portfolio: Lenders will now review landlords’ entire portfolio when deciding whether to approve a mortgage application. This means if a landlord has a number of properties and only some of them are profitable, then a lender may be reluctant to grant a mortgage.
Rental coverage ratio: Prior to the 2017 regulation changes, a landlord needed a rental coverage ratio of 125%. However, lenders now require landlords to have a rental coverage ratio of at least 145% for a standard buy to let property and 170% for a house in multiple occupation.
A stricter stress test: Applicants for buy to let mortgages will now be subject to an even stricter income stress test. Lenders will review the landlords’ ability to make mortgage payments in the event that interest rates increase to 5.5%.
To compare top mortgage rates and find the best interest only mortgage deals for you, use the mortgage calculator above to search over 5,000 deals based on your personal circumstances.