By-To-Let; Interest only or repayment?

phatmanace

Hi folks,

We're considering buying a rental property. Whats the general view on interest-only vs repayment?

My initial instinct was that repayment is the way forward (I was actually surprised that one could even get an IO mortgage for Buy-To-Let)

I've spoken to a couple of friends who have rental properties, and they seem to have them on IO mortages - but I'm curious to hear from the broader community on the pros and cons of each.



Cheers
-Ace

pathtofreedom

What is your aim with the btl? The idea of having io is it helps with the tax bills and you'd be gamberling that the house prices go up, so when you come to sell it you've made more in rental income profit over the years than what you've paid out in costs.

What is your business plan for the btl, as that should help you decide what sort of mortgage is best related to costs, voids, tax, capital gains etc etc.

Givens

phatmanace wrote: »

Hi folks,

We're considering buying a rental property. Whats the general view on interest-only vs repayment?

My initial instinct was that repayment is the way forward (I was actually surprised that one could even get an IO mortgage for Buy-To-Let)

I've spoken to a couple of friends who have rental properties, and they seem to have them on IO mortages - but I'm curious to hear from the broader community on the pros and cons of each.



Cheers
-Ace

It may depend on what your future plans are, will this be the first of many purchases? If so then interest only would be the best way to go.

If not then you should consider a repayment mortgage but thats dependent on how financially comfortable you are given you may have void periods.

amnblog

Any experienced individual building a portfolio of buy to let properties has them on interest only. That's works best for building the portfolio and reducing income tax.


Repayment buy to let's tend to be requested by people who like the security of owning a single BTL property (or perhaps two) bringing in income for their retirement.


What is best for you should be discussed with an accountant and your mortgage broker.