Repayment or Interest Only for new flat?

by Readers Question

10:52 AM, 1st August 2016
About 2 years ago

Repayment or Interest Only for new flat?

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Repayment or Interest Only for new flat?

I am looking to a buy a flat locally for £60,000 the current rents achieved are between £550 to £600.repayment

The same flat on the same floor is worth £75,000. I am looking at a pension really more than short term gains or income which is not needed.

In this position am I better going for a repayment mortgage or just save more buy going interest only and hoping for gains 20 years down the line on the value?

Many thanks

Christian



Comments

Neil Patterson

10:56 AM, 1st August 2016
About 2 years ago

Hi Christian,

Pre mortgage interest relief changes the theory was to always go for interest only as that give the most security against cash flow.

However, now you may not be able to offset all your mortgage interest against tax, depending on your income status, then you may very well be more incentivised to pay down the mortgage. However if you do chose interest only you can still make lump sum reductions depending on loan criteria as and when is convenient to you.

Again depending on tax status the majority of new BTL mortgages are taken out in the name of a Limited Company.

Adrian Jones

12:17 PM, 1st August 2016
About 2 years ago

Morning Neil,

Are any lenders offering interest only these days?

terry sullivan

12:37 PM, 1st August 2016
About 2 years ago

why is it £60000? short lease, punitive ground rent/service charges?

Neil Patterson

12:46 PM, 1st August 2016
About 2 years ago

Hi Adrian,

Most BTL lenders still will it is main residence loans that are harder.

Michael Freer

12:48 PM, 1st August 2016
About 2 years ago

Reply to the comment left by "Neil Patterson" at "01/08/2016 - 10:56":

Is it not better to say that those who wish to grow a portfolio are taking things out in a limited company wrapper, those looking for one or two only can stay reasonably safely with buying the personally as administrative costs and higher interest applied by the lender to limited company mortgages outweigh the savings on tax?

Adrian Jones

15:18 PM, 1st August 2016
About 2 years ago

Reply to the comment left by "Neil Patterson" at "01/08/2016 - 12:46":

Thanks Neil, I thought they had disappeared.


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