Interest 0nly a good idea for BTL

condyk

I have a nice 2 bed apartment in an appreciating area (Frome, Somerset) but have just accepted a job for maybe 18 months in Birmingham. I put the place on the market to sell as I thought buying up there was better than renting again for a few years at least.

First viewer loved the place and offered asking price, which I accepted. Last week, after SEVEN weks of delays, they dropped out because they couldn't get a 125% mortgage (I just discovered this from EA after expressing concerns about hold up to them on two occassions - I think they wanted an easy and quick sale and didn't monitor progress with the guys broker aqnd jujst let things drift!! When I queried they just made nice noises!)

Anyway, as it's a good asset potentially, I was annoyed but not too bothered. I am now going to rent the place out and think just a 'interest only' mortgage would suit.

Rental here is fairly average/low compared to buying prices so will get £525/month while current repayment mortgage is £725. I didn't want to tie myself into another 2 year deal so am paying Northern Rock standard rate at the moment, for last two months.

So ... my question is is this a good approach? I can subsidise the mortgage if I need too, but the idea is the tenants will pay most of it and in two years I can either return to live there or sell.

Made £25000 equity in first 14 months so I expect (never know of course) to make another £20,000 in next two years when I sell. So, my 'cream' will come from appreciating value.

dora37

We've just taken on an interest only BTL mortgage. We borrowed 80% (maximum was 85%) and the rental income had to cover 125% of the mortgage payment.

After looking at several BTL mortgages, this seemed to be pretty much standard practise, however this is just my experience and somebody more knowledgable will probably give you some more info.