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

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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!
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Comments

  • sarkin
    sarkin Posts: 785 Forumite
    where did you get the rates from. They seem a bit high and the arrangement fee on the last is a joke.
  • first 2 were from Only Finance

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

    Any ideas?
  • herbiesjp
    herbiesjp Posts: 8,499 Forumite
    Do you know the names of the actual lenders involved?
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Yea I do for 2 of them

    1st is C&G (Tracker)
    2nd was Mortgage Express
    3rd was CHL
  • Leon_W
    Leon_W Posts: 1,813 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    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.
  • 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
    Leon_W Posts: 1,813 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    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 !
  • 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
    Leon_W Posts: 1,813 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    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
    Leon_W Posts: 1,813 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    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.
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