Most of us grew up with the ethos of buying property as our first investment, and if you are in Europe getting a mortgage and paying it off as soon as possible. After all, why should we pay interest on the money when we can clear it off.
With investment property, however, the solution is different. With a buy to let property, we look at lending like business leverage.
Imagine for a moment you have a mortgage that offers a deposit of 1/3. The property is worth £150,000 and you deposit £50,000 with the mortgage, paying the rest.
- Your tenant pays the rent which in turn pays off all your bills and the mortgage.
- Now not only is your mortgage being paid off, but you also have some income above that.
- Even better the average UK property grows at 4%.
If using some investment strategy we get 5% per annum, but have only invested 1/3 we get triple the returns, meaning we get 15% return on investment per annum before we even account for the rental income.
For more mortgage information including why all international clients can get a mortgage see our other videos linked below the video or on our website.