Buy To Let Offset Mortgage?

adam1982
adam1982 Posts: 50 Forumite
in Mortgages & endowments
Is there such as product as a buy to let offset mortgage?
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  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    adam1982 wrote: »
    Is there such as product as a buy to let offset mortgage?

    Why do want an offset facility on a BTL mortgage?

    Cheaper to borrow less money at the outset.
  • adam1982
    adam1982 Posts: 50 Forumite
    edited 7 October 2010 at 2:18PM
    Hi,

    Because i have a property that wont sell at the moment and i currently have 82k outstanding mortgage. I want to pay off a further 40k and then have the remaining 40k on an offset buy to let. I would then keep another 40k in the offset account rather than tie it up at the moment.

    If you think im talking 'b******s just say!
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    BTL mortgages come with an arrangement fee of 2% - 3.5% of the amount advanced. Or in the case of the post Office a flat £1,500.

    You may find that BTL lenders won't be interested in a £40k advance. As there's insufficent profit for the trouble of lending. Higher initial fees discourage applications.
  • adam1982
    adam1982 Posts: 50 Forumite
    good point.

    If i did want to look into this further is an offset buy to let mortgage actually possible?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    adam1982 wrote: »
    good point.

    If i did want to look into this further is an offset buy to let mortgage actually possible?

    Not a huge number of lenders in the market.

    Mortgage Works, Paragon, Post Office to name a few.

    At least give you a feel for current product options.
  • luckyfool
    luckyfool Posts: 1,683 Forumite
    I'm not aware of any BTL lenders offering offset products, as there is virtually zero demand for it. Interest costs on the Buy to Let can be offset against the rental income, so for most people it is counterproductive to offset savings against the mortgage debt as it may increase any tax bill. If you want to be able to pay the lot off I would take a deal with no redemption penalties, or alternatively a good 2 yr fixed rate (or whatever type of deal suits) and just stick it in savings and pay the mortgage off at the end of the fixed rate.
  • adam1982
    adam1982 Posts: 50 Forumite
    thanks for the replies guys!

    I think based on your advice the interest only option would work out best.

    One thing i am unsure of is if we have a buy to let mortgage does this effect how much we can borrow for our lived in house mortgage or do they treat it as a separate thing?
  • luckyfool
    luckyfool Posts: 1,683 Forumite
    Completely separate as long as it is self financing.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    luckyfool wrote: »
    Completely separate as long as it is self financing.

    Paragon use a 7% interest rate and a 130% of rental income on an interest only basis to determine this.

    As far as I am aware highest in market place so a useful benchmark.
  • bwlv1
    bwlv1 Posts: 316 Forumite
    hi all, hope its ok to comment on such an old thread but you might be able to help me,

    regarding an offset b2l mortgage, for example clydesdale banks current offering with no early repayment penalties etc, could this be a better option than a fixed rate that carries erc's, even if i dont offset anything against it it may save me if i renovate and wish to sell quick.

    thanks for any replies
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