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Buy-to-Let Mortgage Feasibility

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Hi,

I have listened to many videos that imply you can get a BTL mortgage and then just use the rental income from the property to pay off the monthly mortgage repayments. However, I have just had a look on compare the market for mortgage rates (I know, probably not the best rates) and for a £200,000 mortgage (75% LTV mortgage) the monthly repayments are around £700. If this property is rented out for say £800 per month, how is any of this feasible? This is without taking into consideration and other fees/bills which need to be paid.

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Hi @dandeak

Based of the figures mentioned, it sounds like the £700 repayments are on a capital repayment basis, where the debt is reducing down each month. Lenders do also offer mortgages on an interest only basis, where the monthly repayments are substantially lower, but you are only paying the mortgage interest back and you are not reducing your mortgage balance.

Interest Only mortgages are taken out for a number of different reasons, for example if someone is investing in the property to create an additional income stream, via the surplus rental income.

I hope this is helpful and please do let me know if you have any questions.

Best regards

Nathan Cole


Nathan Cole CII (MP)

Mortgage Consultant at Private Finance

Office: +44 (0)1743 211 855

Email: nathan.cole@privatefinance.co.uk

Website: www.privatefinance.co.uk

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Hi,

Your above example isn't feasible. The rent is to low.

Lending would be difficult in this situation, that is why lenders send out valuers to appraise market rent aswell as market sale price as part of their valuation process.

Are you looking at repayment or interest only mortgages on the comparison site?

Conrad

 


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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Looking in the wrong place I'm afraid.

Just bashed those figures into an app and got £436 pcm int only.

You need to be looking at the experts, not the jack of all trades, in this field.

A good, all of the market broker is your friend here.

 

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The difference being capital repayment or interest only. Btl typically do not repay capital each month which reduces the running costs. 

 

Listen to the podcast about leverage (mortgages),  not sure what number, but that'll help you understand. 

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Thank you everyone for the response. If I were to go down the interest only route, is the only real way of paying this off through capital appreciation of the house in say 20yrs or so?

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49 minutes ago, dandeak said:

Thank you everyone for the response. If I were to go down the interest only route, is the only real way of paying this off through capital appreciation of the house in say 20yrs or so?

You can also repay the debt via overpayments. Generally, the majority of lenders will allow you to make overpayments of up to 10% per annum before any early repayment charges would be incurred. 


Nathan Cole CII (MP)

Mortgage Consultant at Private Finance

Office: +44 (0)1743 211 855

Email: nathan.cole@privatefinance.co.uk

Website: www.privatefinance.co.uk

PF.jpg.e1694688fae9149e2cde6fca639c73ea.jpg

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HI all

If the figures only lend themselves to interest only payment plan, because the rental 'yield' is to low I would....

Seriously reconsider your invessential strategy.

Hoping, praying, or reliance on any uplift of capital apprecitation beyond your control ( ie. you are not adding value ) is gambling on the market in my book.

Investments can and do decrease in value sometimes.

Conrad


Conrad Paton

+44 7957 959851

conradpaton@yahoo.co.uk

https://www.linkedin.com/in/conrad-paton-424446110

 

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