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Interest Only You pay only the interest to the lender on a monthly basis. Some lenders expect you to run a suitable investment vehicle alongside the mortgage which should generate sufficient sums to repay the initial capital borrowed by the end of the mortgage term. However the majority of buy to let lenders will happily accept pure interest only loans, with the property itself seen as the investment vehicle which could repay the initial capital borrowed if the loan were to run for the full term. Repayment Mortgage With each monthly payment you pay both the interest and a small part of the outstanding capital. You will repay the full capital balance by the end of the mortgage term. Interest Rate Options Standard Variable Rate (SVR) This is the everyday rate a lender would charge, usually once an initial 'special offer' has ended. Base Rate Tracker Now often used instead of the SVR this rate will directly track the Bank of England Base Rate. Fixed Rate For budgetary certainty you can fix your payments for a set period of time, usually 2 – 5 years. You will usually pay a higher rate for this privilege however. Capped Rate Puts an upper ceiling on the rate you will pay, however allows you to benefit from any fall in rates. Not common as a buy to let product. Discounted Rate You will receive a discount for a set period from either the SVR or Tracker rate. Flexible Mortgages Enable the customer to have complete control in the management of their mortgage in that they vary their monthly payments &/or have a credit facility agreed to draw against, for any purpose, as and when required. Redemption Penalties These usually apply where a lender has offered an initial incentive to attract a customers business. The lender will penalise you should you leave them within a pre-determined period. These could apply on any of the above Interest rate options. |
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