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Property Investment Mortgages on an Interest-Only Basis

Mortgages for property investment are varied and diverse, making purchasing a range of rental or development assets possible. Here we look at the possibility of an interest-only investment mortgage and the key facts to bear in mind.

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Based on your yearly income,

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This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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Almas Uddin

Founder and Mortgage Advisor

2023-05-09

Property Investment Mortgages on an Interest-Only Basis

Property remains a stable investment strategy, and interest-only borrowing can be the most cost-effective way to streamline cash flows and realise an efficient return on your investment.

The Revolution team has created this guide to explain how interest-only lending can support property investments, but for more tailored advice, give us a call on 0330 304 3040 or drop an email to [email protected].

How Do Investment Mortgages Work?

Investment mortgages are designed for landlords, or property investors, who are either buying a property as a rental or intend to resell the property to make a profit.

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The following

topics are

covered below

Are Interest-Only Investment Mortgages a Specialist Product?

What Types of Investment Mortgage Can I Choose Between?

How Do I Know if I am Eligible for an Interest-Only Investment Mortgage?

Expert Advice on UK Investment Mortgages

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Are Interest-Only Investment Mortgages a Specialist Product?

They are - and there are apparent differences from typical residential lending.

Repayment mortgages entail a monthly repayment, with a portion of the original capital value borrowed, and an interest element.

Interest-only mortgages mean paying a smaller monthly amount, solely of the interest, without repaying any of the original loan value.

This works well in investment scenarios, given that the property can be sold at the end of the term, with the equity retained as the return on investment.

What Types of Investment Mortgage Can I Choose Between?

UK lenders offer a range of interest-only borrowing products, such as:

Commercial and semi-commercial lending for businesses.
HMO mortgages for investment properties with multiple residences.
Holiday let mortgages.
Interest-only buy to let mortgages for landlords.

Commercial Mortgages - designed for businesses, from sole traders to large organisations. Semi-commercial means that the property has an element of residential, as well as commercial, space - such as a shop with a flat above it.

HMO Mortgages - HMO stands for 'house of multiple occupants', and usually means at least three people share the property, and not as a single-family unit. If the property accommodates five or more people, it is classed as a large HMO. Interest-only HMO lending is a specialist product.

Holiday Let Mortgages - created for investors either buying a UK or overseas property to let out on a short-term basis.

Buy to Let Mortgages - offered to landlords, with the affordability assessed against the anticipated rental income.

How Do I Know if I am Eligible for an Interest-Only Investment Mortgage?

Investment mortgages look most closely at the income from the investment, as well as your income levels in some cases.

Mainstream lenders often require a minimum £25,000 personal income, although niche interest-only lenders may not have any minimum in place.

The most important eligibility criteria are:

Loan to Value Ratio - caps are usually around 75% to 80% of the property value, with some niche lenders going as high as 85%.
The anticipated rental or investment income and how this will cover the repayment of the lending.
What repayment plan you have, and how reliable and stable the exit strategy is.

HMO Mortgages - eligibility criteria are relatively strict for interest-only lending, which will consider how many residents the property can accommodate, local licensing, and your landlord experience.

Holiday Let Mortgages - this interest-only lending will look at all the above criteria, as well as the location of the property.

Commercial Mortgages - business lending usually requires an experienced broker. Deposits tend to be higher, and the terms depend on the business circumstances and lending scenario.

Buy to Let Mortgages - lenders will look at how much the property is worth, how you expect to repay the balance, and what the likely rental income will be from the investment. Most lenders will need to see a minimum cover - for example; the rental income needs to be at least 125% of the monthly interest-only payments.

Expert Advice on UK Investment Mortgages

For individual advice, and independent recommendations, contact mortgage brokers on 0330 304 3040 or via email at [email protected].

With a vast array of lenders, interest-only products, and eligibility criteria, we ensure you apply to the right lenders to secure the most advantageous deals on the interest-only lending market.

Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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Property Investment Mortgages on an Interest-Only Basis

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Based on your yearly income,

you may be able to borrow