Hi I am coming to remortgage my mortgage on a BTL. I have always gone for a traditional capital repayment means. unfortunately Santander wont allow me to borrow what i want on a repayment basis. It will only allow me a lower amount. I have the option of going on an interest only basis and my broker is suggesting i take this and use overpayments to mimic a capital repayment mortgage.
The costs are circa £930 on a repayment basis and £275 on an interest only basis. 10% overpayment will allow me to pay an additional £1200 per month if needs be.
Can anyone advice me about the pitfalls of doing this. Currently on a repayment basis most of the "profit" is being absorbed by other half's tax free limit so no tax is being paid. Doing this would mean only would be allowed to put £275 per month odd towards claimable interest so remainder from rent would be taxable.
I'd really appreciate someone else's opinion on the issue.