Mortgages
There are essentially two types of mortgage. Repayment mortgages and Interest Only mortgages.
Different mortgages for different property strategies.
There are many types of mortgages for the different types of properties. You will need to discuss which mortgage is best suited for your circumstance. A few mortgage specific types are BTL, FHL, HMO and Commercial mortgages. TPC can connect you with a mortgage broker.
- The Repayment mortgage is when you pay back some of the capital borrowed and some of the interest applied from the lender. The aim is to pay back the original loan with interest throughout the mortgage term. This type of mortgage is usually for a homebuyer who wants to build equity in their own home and eventually own it outright. Your monthly payments are usually higher due to the combination of paying back the loan and the interest at the same time.
- The Interest Only mortgage requires you to pay back only the interest portion of the loan. The amount borrowed will still be owed at the end of the mortgage term. This allows the monthly payment to be lower, which is particularly good when you have a cash flowing rental property. The lower the mortgage bill, the more cash you have from the the rent. This type of mortgage is typically used for investment properties. Over time, your property will go up in value, and the debt (money borrowed) will remain the same. This means you are still building equity in the property and you will be able to refinance the property at the higher value when the time comes. Most IO mortgages allow you to over pay, so you can still chip away at the overall debt if you wish.
Different mortgages for different property strategies.
There are many types of mortgages for the different types of properties. You will need to discuss which mortgage is best suited for your circumstance. A few mortgage specific types are BTL, FHL, HMO and Commercial mortgages. TPC can connect you with a mortgage broker.