The following calculator and commentary are provided solely for informational purposes. Please note that this information may not be current or complete and that it may only apply to certain types of residential properties in England and Northern Ireland. It does not constitute any form of advice.

To finance their investments, landlords typically choose interest-only Buy-to-Let mortgages because they are less expensive and are usually covered by rental income. Those with fixed-rate mortgage deals won’t see their rates change until their current offer expires, but those with tracked and variable rates may see their profits wiped out by their mortgage costs, which rise along with the base rate.

You may want to consider consolidation if you already have multiple buy-to-let mortgages as it may be possible to reduce the amount paid overall by consolidating multiple debts into one property loan. This is especially true if you have had a variety of interest rates on your previous loans. Your lending costs could be reduced as a result. You can discuss this in more detail with one of our specialist property accountants if you would like to find out what options are available to you.

The original amount borrowed by the borrower must be repaid in full when the interest-only mortgage expires. In this type of mortgage, interest is paid monthly and the total loan repayment is deferred until the end. In most cases, a lender will contact you at least a year prior to the end of your term to remind you of the deadline, then again at 6 months, and then once more as the closing date approaches. The lender can then issue you a redemption statement, which confirms the specific amount to be repaid.

This can vary from lender to lender. Most lenders now require some form of deposit but the way they calculate how much they will lend is a factor of the rental income for the property and interest rates. Most BTL lenders operate on an interest cover formula. Typically they will require the rental income to cover anything from 125% to 140% of the interest payments.

If you have further questions feel free to talk to us about your landlord accountancy queries by getting in touch at 0800 907 8633, via [email protected] or via our online contact form to speak to one of our specialist tax advisors.