rossyboy

iTrader: (8)

Those of you with BTLs, which mortgage type do you have and why?

We're looking at getting one and will need to make the decision....

The rental income over the mortgage wont be getting spent, but invested one way or another.

Cocker

iTrader: (3)

If you're confident the property will go up in value then i'd be tempted to go interest only however it has the potential to go badly **** up

EddScott

The issue with interest only these days is what are you going to use to repay the debt?

It's not like it was a few years ago where as long as you gave a brownie promise to pay it all off in 25 years, the lender gave you the money.

These days they want proof (usually)

If you can get away with, I'd be tempted to take in interest only. Least then if you don't have a tenent, the mortgage payments will be lower and while you do have a tenent, the difference in what they pay you and you pay your lender can be invested (assuming you feel confident you can outperform the repayment rate - and that you don't go variable or tracker and interest rates get out of control.

5% plus whatever tracker rate you choose would be horrific.

rossyboy

iTrader: (8)

Deposit will be 30% ish and a 30%+ drop in prices isn't a likely scenario in this area.

I do like the idea of having a reduced mortgage in case of empty periods. There's also increased interest rates in future to consider I guess!

Ray T

also the interest only "portion" comes straight of your income for tax purposes, a lot of people have had grief when they thought they could claim all of a repayment mortgage.

tony de wonderful

It's ridiculous you get any tax benefits.

Fantom

Surely if you can afford it then repayment is the best option. You will save loads in interest in the long term. Unless you are very good at investing of course.

madscoob

iTrader: (3)

remember the council tax when empty. where i am the property i was renting out .had to be unfurnished in order to not pay council tax .for 6months free grace period. so all i did was put all the furniture in the garage , failing that make sure its unfurnished

Cocker

iTrader: (3)

But the "repayment" part of the mortgage that he won't be paying with an interest only will be his monthly saving, plus the profit from the rental, plus the "hopeful" profit when he sells the house in 20 years time to pay off the mortgage

As said the biggest risk IMO is that the house is worth less than the original mortgage when its time to pay it off

When i bought my first flat i wish i had gone down the interest only route. I made circa 40k profit which was the deposit i used to by my now family hme. Was in the flat 5 years and the actual mortgage had only decreased by about 10k. If i had an interest only mortgage i would of saved alot more by having a lower monthly repayment than i made on having a repayment mortgage from day 1.

Saying that whether i would of invested the difference is another story. At 22 like i was at the time i probably would of pissed it up the wall

rossyboy

iTrader: (8)

Thats something I was unsure of, so thanks for clarifying. That'll help with working out if its actually worth the risk

I dont fancy spending a big portion of my life trying to constantly beat the amount I could save in interest, so good advice again

The risk of the repayment mortgage is potentially putting more money into an asset that may depreciate. But I guess most investments carry that risk.

Blue by You

iTrader: (23)

It's a form of business, you pay tax on the revenue, you get benefits on the costs. Simples!

njkmrs

I prefer the repayment mortgage .
If you dont need the extra income BTL can bring ,then use it to reduce that mortgage and build up your equity for retirement .

PaulC72

And eventually the CGT too ....

Puff The Magic Wagon!

iTrader: (2)

Depends what your longterm aim is.

Mine is a pension provision so that in 20 years time/less,mortgage will be all paid and I will be getting the benefits of all the rental income (so no CGT). At the moment, its neutral in that it doesn't cost more than it brings in (small surplus after everything). I'll keep it going 'til I either die & leave it to my daughter or maybe flog it when I'm incontinent, gaga & need to go to an old people's home to die (hopefully before that when I start to "go", I will sail out into the sunset and slip quietly into the water..).

cookstar

iTrader: (6)

Some of mine that I intend on keeping for 20+ years are on a repayment basis, I did this so when the time comes to retire then they are all paid off.

The others that will be sold/flipped soon are on an interest only basis.

It all comes down to what you want from the property.

mamoon2

I've got 3 going through at the moment interest only. Rather have the rental income at the minute.

I'm in my 20's so plenty of time to switch them to repayment in a few years for a pension pot

markb_s1

both of mine are on repayment.
rent covers the mortgage and gives me a couple of hundred a month extra in my pocket...

look out for the tax man though.