Buy to Let Repayment Mortgages UK

By Kristian Derrick

Last Reviewed: 31st August 2023

It is expected that the Bank of England to increase the base rate from the current to over 5% on 3 August 2023.

This news alone has got the average potential property investor in a flurry.

One thing is for sure, buy to let mortgage rates have sharply increased as lenders increase their fees in fear of a future hike to the Bank of England base rate.

This leaves the question begging: is now the right time to invest in property?

While buying a home for personal residence presents costs and possible financial difficulties for the average Briton, buy to let properties present an opportunity to make an income.

As such, more people are opting for buy to let repayment mortgages to ensure that their investment is paid off, and they can afford the ever-increasing cost of living.

If the idea of investing in buy to let property is appealing to you, you may find that getting approval during these tough financial times can prove difficult.

You’ll need to decide between the various buy to let mortgages available and have some understanding of the process.

While some opt for buy to let interest-only deals, we’re focusing on buy to let repayment mortgages as a viable option in this overview.

Using this guide, you can investigate the options available and make a confident decision.

What are Buy to Let Repayment Mortgages, and Why Would You Want One?

Buy to let repayment mortgages require the investor to pay the capital and interest together throughout the loan agreement.

With this type of mortgage, you’re paying down both the interest and capital simultaneously.

If you don’t miss any instalments, you’ll have 100% property ownership by the end of your mortgage term.

Interest-only deals work differently in that you’ll only pay the interest for the term of your mortgage and will need to settle a lump sum at the end of the term, which is the capital loan amount.

For those interested in increasing their retirement nest egg, buy to let repayment mortgages are particularly attractive.

Once you’ve paid off the property, the amount you receive in the rental will be your income.

And if you choose to sell the property in the future, you will likely profit from the sale.

Qualifying Criteria for Buy to Let Repayment Mortgages

To successfully apply, you’ll need to:

  • Pass an affordability assessment
  • Have a good credit history
  • Provide your employment details and proof of income
  • Have details of the property you want to invest in at hand
  • Have a deposit available

How to Buy to Let Repayment Mortgages and Interest-Only Mortgages Compare?

It’s evident that interest-only deals are the most chosen type of buy to let mortgage.

These mortgage options are viable financing avenues, and your investment goals will ultimately decide which is better for you.

Interest-only mortgages require an exit strategy, as you’ll still owe money on the deal when the mortgage term ends.

Either you’ll need to settle this in full or remortgage the balance.

If you opt for an interest-only mortgage, you can expect to have more available cash each month, as the instalments are lower than repayment mortgages.

That said, buy to let repayment mortgages are generally more affordable, as you’ll pay down capital and interest each month.

Pros and Cons of By to Let Repayment Mortgages

As with most things in life, there are pros and cons to consider.

Some of the best advantages of buy to let repayment mortgages include:

  • Once the loan term comes to an end, you’ll be the outright owner of the property.
  • Most repayment mortgages come with lower interest rates than interest-only mortgages.
  • You’ll have a secure form of income when you retire.
  • Over time, interest on the mortgage decreases.
  • You can pass the property on to your children or someone else.

The most common disadvantages associated with buy to let repayment mortgages include:

  • It can be challenging to get approval for the mortgages.
  • It’s not a given that your chosen lender will offer a buy to let repayment mortgage.
  • If you’re hoping to invest in a particularly expensive property, you may find it hard to secure a buy to let repayment mortgage.
  • Monthly instalments are typically higher than interest-only deals.

If you have several investment properties, you may want to diversify your portfolio by having some properties on an interest-only mortgage, and some on a repayment mortgage.

Tips for Getting the Best Buy to Let Repayment Mortgage Rate

Everyone wants to get the best possible deal they can, and if you want to ensure your repayment mortgage rate is as low as possible, you can do a few things.

The first is to ensure that you have a decent deposit to offer.

Make sure that your credit record is clear and that you’re shopping around for deals instead of accepting the first one that comes your way.

If you have outstanding debts, pay them off to have more cash flow available. Don’t make any hefty purchases for at least three months before applying for the mortgage.

Buy to Let Repayment Mortgage In Conclusion

While interest rates are set to rise, there’s still a lucrative property landscape to be explored, especially for those looking for investment property for income purposes.

A buy to let repayment mortgage is a good option, and consulting with a mortgage expert can have you furnished with all the details you need to make a confident decision.

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