The world of mortgage payments might sometimes be difficult to traverse through, it requires to be foresighted, intuit and well informed. Are you at crossroads trying to decide on a mortgage payment method for your Buy-to-let property? Well, as a a diligent property investor you must weigh in your options before settling for one. And, as property investment advisors we will help you calculate the pros and cons of these mortgage payments.
Repayment Mortgage
A monthly repayment of a combination of both capital amount and interest occurred on the loan for an agreed term.
Repayment Mortgage for BTL Properties: Advantages:
- Reduces the debt (and a significant burden) since portions of the capital amount is paid off every month without having to be repaid as a lump sum in the end. And as the overall capital amount to be repaid reduces, it is likely that less interest is occurred with each progressing month.
- The most attractive feature is being able to own the property towards the end of the term, after the full payment of the capital and interest.
This mortgage payment might seem less attractive to buyers who do not fancy big chunks of money leaving their pockets every month, reducing the ability to do savings until the mortgage is paid off. To counter this
Interest-only Mortgage
Only the interest amount occurred over the loan (and not the borrowed capital) is repaid every month within an agreed term, and the capital amount is paid off all at once towards the end of the term.
Interest-only Mortgage for BTL properties: Advantages:
- Will be repaying in smaller amounts every month, since it’s just the interest amount.
- If you consider from the long-term perspective, shooting up house prices will cause mortgage debt to crumble down.
- The landlords will be able to sell the property at a higher price, make profit and be able to pay off the capital amount from the profit incurred.
The only drawback of an interest-only mortgage payment is that the capital amount must be paid off fully to own the property at the end of the term. Until the capital amount is paid off, there will be continuous recurring payments of interest.
It becomes essential to seek professional advice to come up with a ‘repayment vehicle’ to pay off the capital amount in this case. Contact E.R.E Property today and explore your options by consulting with our team of property experts and due diligence specialists!
