Buy to let mortgages, are they the best mortgages?

Buy to let mortgages, are they the best mortgages? When deciding what mortgage to get for your new home or property it is important to think about the purpose of your home loan. If you’re planning to buy a property to let or rent this is especially important. Unless you have the cash the home outright you will probably be hoping to subsidize some if not all of the mortgage payments with the income from the monthly rent payments you hope to receive. As this will probably will be your second or third home you can’t hope for the tax relief you would receive on the home you live in, your primary home.

So what kind of mortgage is best when you are buying to let? The article’s title was purposefully incorrect. People often see buy to let mortgages as a type of their own, but they aren’t. The purpose of the mortgage might change but you still have to decide if you want a variable interest mortgage, a fixed interest mortgage or a A.R.M (adjusted rate mortgage) which combines the features of the previous both types.

There  is not one answer to that question? You must come up with then answer by thinking about your specific circumstances. We can help by setting the principles that should govern your choices. A) How long are you planning to rent the property? B) What will you do with it after? Sell it, live in it? C) What worries you more, a significant change in your monthly budget or paying over and above the going rate.

Let’s analyze these three pointers and see how they can help you to make an informed choice on which is the best mortgage when you are buying to let.

Are you planning to let house for a set amount of time and then change the purpose of the property. Paying a premium for fixed interest rate when you have someone living in the property and providing you income can be an attractive option.

However there are other factors to consider. Maybe you plan to live in the property or even sell it. If this is the case you might benefit from a hybrid mortgage or home loan, an A.R.M. As described these loans can provide you with a fixed interest rate for some years, you decide how many, and then is adjusted to a variable interest rate mortgage. What is the benefit if you are going to sell it anyway, you won’t care if it’s variable or fixed if you sell it before completing the mortgage? Right? Well that is true, but if you set the mortgage as a fixed rate mortgage for the whole tenure (life) of the loan you will pay for it, the longer the tenure the higher the interest (read price) you will pay. However if you are confident you will sell in 5 or 10 years, why foot the bill of a fixed rate interest for the whole tenure? Set the A.R.M as fixed interest for the period you plant to own the home and you could save yourself a pretty penny.