WHat is the best way to structure your mortgages if you have a buy-to-let investment?

Question

I have a repayment mortgage and have done for 4 years. It seems odd that other buy-to-letters don't do this. I don't understand. What type of mortgage set up should I have? How do people make money in property? IS there a secret I don't know about!!!? I'm sure it all comes down to financing etc.

Answer 1

Most buy-to-let Mortgages are Interest Only.

This is because :-
1) Lower payments .. the lower the payment, the higher the value of house(s) you can 'own'.
2) Interest (but not capital) payments are an allowable expense (i.e. the Rent you collect can be used to pay the Interest Only Mortgage before it is taxed).

The ideal situation is thus owning as many buy-to-let properties as possible where the Tenants are paying the Interest Only mortgage.

When you decide to sell up, the mortgage lender gets the original purchase price, but the buy-to-let owner gets all the equity (increase in house price).

If the owner is clever he moves into the house before starting to Rent it out, Rents it out for no more than 3 years and then moves in again before selling. In that way he gets maximum PPR (Principle Private Residence) Relief and pays minimal Capital Gains Tax...

Answer 2

Since many nations use different
deeds, mortgages and more,
you would do well to volunteer
where you are writing from.

I have not heard of in 35 yrs,
a buy to let investment. I think you
mean buy a property with the intent
to rent it out.

And you say you have a repayment
mortgage. NOT sure what that
is either. A mortgage reduces the
money due to the lender who
financed part or all of a real estate
purchase. Some mortgages
do not reduce the principle, only
allow a person to make mini
payments to cover only interest.

IF you want to get the maximum
benefits from real estate,
get a mortgage with principle and
interest included and make 1.15%
payments--meaning, pay extra
every month to reduced the
principal owed.