Buy To Let Interest Only Mortgage. Investing in rental properties has been a popular way of building wealth for many people. However, not everyone has the capital to purchase properties outright. This is where buy to let interest only mortgages come in. This article explores what these mortgages are, their pros and cons, and how to qualify for them.
What are Buy To Let Interest Only Mortgages?
A buy to let interest only mortgage is a type of mortgage that allows the borrower to only pay the interest on the loan for a set period. Unlike traditional mortgages, where the borrower pays both the principal and interest, buy to let interest only mortgages only require the payment of interest. At the end of the term, the borrower must either pay off the entire loan or refinance it.
Pros and Cons of Buy To Let Interest Only Mortgages
One of the biggest advantages of buy to let interest only mortgages is the lower monthly payment, which can make owning a rental property more affordable. Additionally, the interest payments are tax-deductible, which can help reduce the overall tax burden. On the other hand, the borrower is not building equity in the property and will need to come up with a plan on how to pay off the principal at the end of the term. There is also the risk of the property not appreciating in value, leaving the borrower with a loss.
How to Qualify for a Buy To Let Interest Only Mortgage
Qualifying for a buy to let interest only mortgage is similar to qualifying for a traditional mortgage. Lenders will look at the borrower’s credit score, income, and the rental income potential of the property. The rental income should be enough to cover the monthly interest payments, and the borrower should have a plan in place to pay off the principal at the end of the term. It’s also important to note that lenders may require a larger down payment and may charge higher interest rates for buy to let interest only mortgages.
Buy to let interest only mortgages can be a useful tool for investors looking to get into the rental property market. However, like any financial product, it’s important to weigh the pros and cons and understand the requirements before committing to one. With the right plan in place, a buy to let interest only mortgage can be a way to build wealth and secure your financial future.