Friday, October 31, 2008

Buy To Let Mortgage Refinancing

The buy to let mortgage allows the borrower to purchase a property. Then, the property can be rented to the tenant. The tenant pays the rent in which the borrower uses to pay the mortgage payment.

The borrower benefits from buy to let mortgages by creating the home equity. As long as there are tenants, the borrowers never need to use their own money to pay the mortgage payment. Eventually, the borrower can sell the property at a higher price.

The mortgage lenders may approve many types of buy to let mortgage refinancing. That includes fixed rate, variable rate, capped mortgage, discounted mortgage, cashback mortgage, and interest only mortgage.

In a fixed rate mortgage, the borrower pays the same interest rate on all the payments. So, the borrower pays the same mortgage payment on each payment period. This is conventional way to finance a property.

In a variable rate mortgage, the borrower pays the current interest rate. The interest rate fluctuates from time to time. As the interest rate increases, the borrower pays less on the principal. As the interest rate decreases, the borrower pays more on the principal.

In a capped mortgage, the borrower pays the current interest rate up to the maximum interest rate. The mortgage lenders set the maximum interest rate that the borrower pays. If the current interest rate went past the maximum interest rate, the borrower will only pay the maximum interest rate. If the current interest rate went below the maximum interest rate, the borrower pays a lower interest rate.

In a discounted mortgage, the borrower pays less interest rate than the current interest rate. For example, the current interest rate is five percent. The mortgage lenders charge one percent below the current interest rate which is four percent.

In a cashback mortgage, the borrower gets a certain percentage from the mortgage. For example, the mortgage lender gives three percent cashback on a $100,000 mortgage. So, the borrower gets $3,000 (3% x $100,000).

In an interest only mortgage, the borrower only pays the interest rate up to the end of mortgage term. So, the borrower does not pay off the mortgage. At the end of the mortgage term, the borrower pays the normal amount of mortgage payment.

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