Mixed Buy To Let Mortgages: A Third Option
If you wish to buy a property in order to rent it out to tenants, a buy to let mortgage is probably the right mortgage product for you. These kinds of mortgages allow you buy a property and essentially let it pay for itself through the revenues made from rents. Buy to let mortgages are also based on the projected income from rents from tenants, rather than your personal income, which means that your mortgage quote will be a more realistic and business-like one.
There are also sub-categories within the buy to let mortgage market; not all buy to let mortgages are the same. You can use an independent buy to let mortgage advisor shop around for you, or do your own research using mortgage comparison sites, in order to find the mortgage product that best suits your personal circumstances. As well as interest only or repayment products, there is also a third category; the mixed buy to let mortgage.
What is a mixed buy to let mortgage?
Whilst an interest-only mortgage means that only your interest is paid during the life of your mortgage, leaving you with a large principal amount owing at the end, a repayment mortgage pays both the interest and the principal during the life of the mortgage, meaning that you own the property outright at the end of the mortgage term provided you have met all of the payments. If neither of these options suits your own position, however, there is also the option of the mixed buy to let mortgage, which is a combination of some of the more favourable conditions of both repayment and interest only mortgages.
A mixed buy to let mortgage means that you can combine an amount for principal repayment and an amount for your interest payment in each monthly payment. So, your monthly payment is made up of the amount due on the interest charged for the entire amount borrowed, as well as the amount owed on the principal or capital repayment. This could work out cheaper in the long run as it may reduce the payment due at the end of the mortgage term, but you will still need to create a nest-egg to pay off the outstanding balance at the end of the term, as with an interest-only mortgage. This need not be as intimidating as it sounds, however. With all of that time before the end of the mortgage term (on average, 25 years), you have plenty of time to open an ISA and save up, arranging for the end of the savings plan to coincide with the end of the mortgage term. Alternatively, you can sell the property at the end of the mortgage term in order to pay the outstanding amount.
However you decide to finish off paying the mortgage, a mixed buy to let mortgage can help give you peace of mind, as you know you are paying more than the cheapest monthly repayment (as an interest-only mortgage would) and yet possibly paying less than you would with a repayment buy to let mortgage.
