Buy to Let Mortgage Repayment Options

It’s easy to look at the prospect of becoming a landlord and thinking it will be an easy way to earn money. In some respects it can certainly be lucrative but there are many responsibilities they have and the biggest is finding the right mortgage so that they can purchase a property in the first place. They must first find a buy to let mortgage lender who is willing to give them the mortgage they need.

Buy to Let Mortgage Repayment Options

You need to be able to make sure that you can afford to repay the mortgage. That is why most lenders will look for the rental income to be at least 25% more than the mortgage repayment to make sure you have enough money even if the market drops slightly.

There are basically two options of buy to let mortgage repayments and those are interest only or a capital repayment loan.

Interest Only Mortgage – With this type of mortgage the landlord will only pay back the interest each month and not the original loan. This means you can get started on the property ladder by paying a lower amount each month but the negative point is that you will still owe the lender the full amount at the end of the mortgage period. So you need to rely on being able to sell the property to cover the full payment.

Capital Repayment Mortgage – This is just like a normal mortgage. Each month you pay off the interest and a small amount of the loan. So over a period of 25 years you can eventually pay off the entire amount and the property will be fully paid for. Many landlords prefer this type of mortgage because it is the tenants who are paying off the mortgage for them and if they can keep the property rented, then they just have to keep up with maintenance on the property and it will be theirs in 25 years.

Those are the two major types of buy to let mortgage repayment options available for landlords.