Choose your Buy to Let repayments wisely

Choose your Buy to Let repayments wisely

Borrowing money from the banks can sometimes have your head in a spin.

So many figures and numbers flying around that more often than not, you forget the ones that matter the most.

You’re repayments.

Or better yet, how you choose to repay your mortgage.

Are you going to chose standard repayments or interest- only?

It’s at this point that new investors start to stutter and stall.

Knowing the answer to this question could mean the difference to growing your capital or growing your portfolio.

You’re probably thinking, why does it matter so much?

 

Standard repayments.

This repayment type is made up of interest on the loan and a portion of the amount borrowed.

Over time, as more of the loan is payed off, the repayment amounts reduce and the equity in the property increases.

This type of repayment is structured so that at the end of the loan term, both the interest and the amount borrowed is paid off in full. The property is then owned outright.

Which may seem great. Not only are you generating an income but you’re tenants, are in effect, paying for your mortgage on the house.

 

Interest-only repayments.

With this repayment type, you are only paying the interest on the loan each month, not the amount borrowed.

At the end of the mortgage term you would pay the full amount borrowed.

If you wanted to retain the property you would need a plan in place to repay the original loan. This is usually done through selling or refinancing onto another Buy to Let.

This is also a great option, as it increases your monthly income. Investors can then use that income to invest in more properties. At the end of the term they could simply sell the property, hopefully for more than the original amount and retain the equity.

 

What are your objectives.

If growing your capital interests you, or you want fully owned assets to pass on to relatives, then standard repayments may be your better option.

If your looking at increasing your property portfolio and generate a passive income, than interest-only is one to take into consideration.

The question of which repayment option to take needs to be heavily influenced by what strategy you want to put in place for your property portfolio.

Talk to more experienced property investors.

The experienced investors I’ve recently come across, will mix the two types of repayments. Some of their properties will be interest-only to generate a larger income. Others will be on standard repayment types to create a larger capital. Chose wisely and get your strategy in place.

 

If you would like more information on Buy to Let mortgages feel free to contact us on 07399 660 002 – 01709 805 624 or alternatively you can drop us an email at info@jjcommercialfinance.co.uk