Baffled about which rate to go with for Buy to Let!

chris163

Hi,

I have just spent most of the afternoon looking for a mortgage and am staggered by the choice!

As anyone who read my previous thread will know, I am after a buy to let as a first time buyer.

I have been given the all clear on 1 property which is available at the price i wanted it - £115k - privately.

Its a 1 Bedroom Studio Flat with a rental income of between £500-540 a month realistically. I based all the figures on £500-520 to be conservative.

So its now a question of getting the right mortgage and making a formal offer....

I have been offered the following mortgages:

1. Tracker - 4.95% with £800 setup fee - 2 years

2. Fixed rate - 5.5% with £2000 (gulp!) setup fee - 2 years

3. Fixed rate - 4.74% with £2600 setup fee (bigger gulp!) - 2 years

The fact im 21 and a first time buyer I guess doesnt help, but im shocked by the setup fee's on the last 2!

I ideally dont want a tracker mortgage - i would prefer a fixed rate....

Anyone aware of any suitable deals? I can do it on 85% LTV or maybe 75-80% LTV if necessary.

My credit rating (i believe) is good, and havent had any CCJ's etc.

Cheers!

sarkin

where did you get the rates from. They seem a bit high and the arrangement fee on the last is a joke.

chris163

first 2 were from Only Finance

2nd 1 was from another Broker which I cant remember the name of.

Any ideas?

herbiesjp

Do you know the names of the actual lenders involved?

chris163

Yea I do for 2 of them

1st is C&G (Tracker)
2nd was Mortgage Express
3rd was CHL

Leon_W

I would be inclined to sound out a few local surveyors and ask which lenders consider the type of property you want.

None of the lenders you mention take 1 bed studio flats without it having to be referred. If there is any whiff of insufficient demand or poor resaleability then they will not lend.

I have had various fights with CHL and Mortgage Express over such issues and have the scars to prove it.

All I am saying is research thoroughly (or use a broker) for this one as you may find that your valuation fee is lost due to the fact that they wouldn't even lend on the property in the first place.

chris163

Hi Leon,

Thanks for the advice!

I used 2 brokers today who came up with those options...:s

Basically, I am a letting agent and I can Let this property within 1 day...in my area, studio flats are snapped up both to buy and rent (the only reason i have it available to buy is as its a private deal).

There is currently a tenant in the flat who is paying £500 a month who wants to stay for 2+ years. I do feel I could get £520/530 without a push though.

Who would you suggest is worth trying?

Leon_W

What you have to consider is will this be a long term thing or just for a couple of years ?

If it's long term then a term tracker is the way to go. I know it's more expensive to start with but as you are aware, buy to let mortgages attract the fees ! The reason I say a term tracker, is that you wont be having to pay yet another huge arrangement fee ( plus legals and valuation if you're unlucky) in just two years time when your current deal expires. Look at some of the fees you've been quoted, £2000 !!. Over 2 years that is £83pm. All your profit will be gone !

£2000 isn't out of the ordinary as you know so I would be inclined to pay it just the once and get the best term tracker I could find.

Actually, give me 10 minutes and I'll have a look. These are unregulated so I feel as though I'm off the leash a bit !

chris163

haha Leon I REALLY appreciate your advice.

The 2 Brokers I spoke to today were both helpful, but I felt they were trying to sell me the product rather than listen to my needs....and as a salesman, it gets on my nerves lol

Basically...its my first property - im 21, live at home and thought I would buy a place as the prices are sky rocketing. I have some savings invested in a property my dad owns which will be free in June/July so I can then buy my own property, all going well.

The plan would be to keep this one on if possible....i mean, im on 35k a year, dont have any significant debts and will have around £40,000 to put into my own property, which will hopefully mean I can hang onto this....but things can change!

I thought 2 years would be safe....a friend of mine said it is wise to remortgage and buy another etc. - how possible is it to do this during a mortgage period if you stuck with the same lender?

Leon_W

Before I come back to you on my previous post....

"A friend said it is wise to remortgage and buy another" . It might well be but who knows whats around the corner ???.

If you are "stuck" with the same lender then I don't see this as an issue. Most lenders will offer you a further advance as long as the figures stack up and there is sufficient equity in the property. No need to remortgage.

Leon_W

Northern Rock have a howitser of a term tracker. Bank of England base rate + 0.04 for the term of the mortgage ! Payrate of only 5.29%

I don't think you can get that on a residential. Now for the bad news. You can't have it. No Studios !

2.5% arrangement fee aswell which is STEEP. BUT if this is the only mortgage you buy and keep it for 25 odd years then it will seem like a veritable bargain.

Cheltenham and Gloucester Have a BBR + 0.44% (£1999 arrg fee) and CHL still have the BBR + 0.49 (1.5% of loan) which is pretty much the best of the rest.