Mortgage Works BTL 4.99% 5 Years fixed

JohnDoe1

Hi guys,

Is the Mortgage Works BTL 4.99% 5 Years fixed a good deal? It's relatively new and the only one I can find with a 50% LTV. Looking to borrow £100k.

There is also a rather large 3.5% arrangement fee! Plus you have to use their valuations @ £490.

Other options are trackers which seem OK for now but there's no peace of mind...

kingstreet

Nearly £4k in fees for a £100k 50% advance?

You'd be stark raving mad to accept that. It's atrocious.

What are the details of the case and who recommended that deal to you?

Purchase or remortgage?

Price or value?

Advance £100k

Rental income?

Any problems we need to know about?

JohnDoe1

kingstreet wrote: »

Nearly £4k in fees for a £100k 50% advance?

You'd be stark raving mad to accept that. It's atrocious.

What are the details of the case and who recommended that deal to you?

Purchase or remortgage?

Price or value?

Advance £100k

Rental income?

Any problems we need to know about?

Re-mortgage existing 'owned outright' property valued at around £220k which is currently rented out at £1k per month.

but the main thing you need to know is that I'm currently unemployed which I think limits severely my choice of lenders...

kingstreet

So you're stuck with TMW.

The 6.29% deal works out at £524 per month on an interest-only basis. That has £465 upfront fees and £145 exit fee.

Your 4.99% deal is obviously cheaper at £431, but the difference would be less after offsetting the interest against the rental income for tax purposes. Then you're paying £3,500 more in fees, the equivalent of £700 a year over the five years. Exit fee on top.

TBH I didn't realise the difference in rate would be as big as it it, but I'd still balk at paying a fee that big for such a small mortgage.

JohnDoe1

Thanks for taking the time to reply and advise! Much appreciated!

I was hoping you wouldn't confirm that TMW was my only choice.

Yep, the £3.5k arrangement fee leaves a very sour taste in the mouth. That was another reason why I had(?) to choose the longest fixed term rate to reduce the yearly cost. But given all you've said, the 4.99 rate is still the cheapest for me from the whole TMW rate card?

I was thinking of doing a repayment mortgage rather than interest only. Is there a good reason why interest only is preferred?

Thrugelmir

JohnDoe1 wrote: »

I was thinking of doing a repayment mortgage rather than interest only. Is there a good reason why interest only is preferred?

Reducing the interest charge increases taxable profit. So depends if you are looking long term i.e. hold the property as a pension. Or are looking to flip the property on the back of a property upturn and make a capital gain.

Longer term the debt does need to be repaid.

JohnDoe1

Thrugelmir wrote: »

Reducing the interest charge increases taxable profit. So depends if you are looking long term i.e. hold the property as a pension. Or are looking to flip the property on the back of a property upturn and make a capital gain.

Longer term the debt does need to be repaid.

Thanks.

Even if I were to flip the property back on the market after a few years to make capital gain, does it mean interest only is the way to go?

jimjames

I'd say no, it isnt a good deal unless you want to know exactly what you are paying and are happy to pay extra for that.

Market Harborough are currently offering 3.85% variable as 1.64% discounted lifetime rate. £800 fee and no penalty.

Edit - just read you are not working which may be an issue with this lender. Do you need to remortgage now or could it wait until your circumstances improve? Taxable income is less relevant if you are not paying tax.

JohnDoe1

jimjames wrote: »

I'd say no, it isnt a good deal unless you want to know exactly what you are paying and are happy to pay extra for that.

Market Harborough are currently offering 3.85% variable as 1.64% discounted lifetime rate. £800 fee and no penalty.

Edit - just read you are not working which may be an issue with this lender. Do you need to remortgage now or could it wait until your circumstances improve? Taxable income is less relevant if you are not paying tax.

Preferably want to re-mortgage now as don't know when circumstances will change. Just looked at Market Harborough and they want earned income details so that's out.

Does your last sentence imply that repayment is better than interest only if I'm not paying tax?

So is there really only one lender than lends without earned income?

jimjames

JohnDoe1 wrote: »

Does your last sentence imply that repayment is better than interest only if I'm not paying tax?

The reason (I believe) that interest only is preferred is that it keeps the interest payments static and the whole amount can then be set against tax. If capital is repaid then interest will drop and the capital payments are not tax deductable.

JohnDoe1 wrote: »

So is there really only one lender than lends without earned income?

It may be worth speaking to an adviser that specialises in BTL but I'm sure other lenders must deal with this scenario too although they may have other criteria like number of properties required etc. Not sure if the deal you found was via an adviser or just searching web.

JohnDoe1

So probably the sensible thing to do is have a repayment mortgage whilst I'm not paying tax and if/when I start paying tax again, switch back to interest only?

I've called a few brokers and most say no lenders do this and a couple say one lender which I guess is TMW.

OK, look as if I will be trying to apply for this anyway even though Kingstreet has made his advice perfectly clear!

kingstreet wrote: »

You'd be stark raving mad to accept that. It's atrocious.

Lack of options means the loony bin for me!