Gatehouse estates

Buy to Let Finance

Cash, Capital and Interest mortgage, or interest only loan?

This depends on a number of factors.

The principal factor is the amount of cash you have available. While you’re likely to earn around 1% on your cash in a bank account, you may prefer to earn much more from using all of it to pay for a rental property as your return on your capital employed is likely to be considerably more.

Add to this, the prospect of property values rising over the next 5 years, the return on your buy to let investment starts to look like great value.

Here’s some comparisons indicating a likely return on the amount of money that you inject into the project.

Option 1.

Cash purchase

  • £120,000 purchase (capital employed)
  • £6900 annual rent if no voids
  • £1650 approx annual spend on management fees: annual gas test: rent insurance: buildings insurance inc VAT
  • £5250 annual surplus (taxable)
  • 4.4% return on capital employed

Option 2.

75% loan to value (LTV) on the same £120,000 property.

  • £30,000 deposit (capital employed)
  • £90,000 Mortgage £4500 annual interest (£375 pcm)
  • £6900 annual rent if no voids
  • £1650 approx annual spend on management fees: annual gas test: rent insurance: buildings insurance: inc VAT
  • £750 surplus. A 2.5% return on capital employed

The value of future capital growth is a much more difficult figure to project accurately, so we suggest a modest rise in house values of just 2% each year for 5 years.

On the basis of this sum being cumulative, the total projected rise in value could be £12,489 in 5 years, plus the return on capital employed shown in options one or two, above.


Normal 2 storey property assuming a purchase price of £120k

5% fixed interest only mortgage

£575 per calendar month gross rent

No allowance for maintenance or repairs made

Conveyance fees; mortgage arrangement fees; survey fees are not provided for in these calculations


If you spend more on a property, it does not necessarily follow that the return on the capital employed will be the same as in the examples shown in 1 and 2.

We strongly recommend that you use our free expertise to make an assessment of your potential buy to let purchase, before you commit to buying.

Choose an investment, not a liability….. (more)


To discuss your interest in buy to let property,

please call Phillip Malley on +44 (0)1480 434290 or email him from here,

Gatehouse estates
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