Best buy to let rates?

Brighty

Hi guys

I own a rental property 50/50 with my brother, we did live there, but he relocated abroad and i relocated to the North so we let it out with consent to let from Nationwide nearly 4 years ago.

We were sat happily on nationwide's BMR of 2.5%, but on renewing our consent to let earlier this year we have now been hit with an additional 1.5% so are now sat on 4% and also exposed to any potential base rate rise.

Can we get a better buy to let rate than this taking into account fees? Preferably fixed rate i think. Had a look online and rates don't seem a huge amount lower than what we're on, but with large fees to consider. But apparently the best deals are broker only, how much lower are these?

Outstanding repayment mortgage is 67k with 12.5 yrs left to run. Property value is 230-240k, so we're below 30% LTV

We also own 2 other mortgage free rental properties 50/50 if that helps in any way, plus have mortgages on seperate residential properies each.

Thanks

Regards

Brighty

kingstreet

IMHO with a mortgage that size, the fees you'll incur in remortgaging will outweigh the savings you'll get from a lower rate.

The lower interest cost will also see the taxable income from the property rise.

Talk to a whole market broker and get tailored comparisons to see.

ACG

2.6% with £1700 in fees?

There could be lower/better rates/deals available, i was just doing a mortgage with with a similar LTV (but different figures) so thought i would just have a quick look.

But the majority of BTLs are available through brokers really. Thats not to say the best ones are (im not saying theyre not btw - just to sit on the fence) but in order to open yourself up to the majority of deals you will need a broker.

kingstreet

The other thing to remember here, on a repayment mortgage of only £67,500 with 12.5 years left, the bulk of what you pay each month is capital, so the interest rate has less impact.

For example, £67,500 over 13* years at;-

4% = £555.60 per month, of which £225 is interest

2.5% = £507.25 per month, of which £141 is interest.

Therefore, you pay £48 per month less, but a higher rate taxpayer is going to lose out by £33.60 per month in higher tax on the "net profit" (which is £225 - £141 = £84 x 40% = £33.60.)

*Easier to use calc with complete years only.

Brighty

ACG wrote: »

2.6% with £1700 in fees?

There could be lower/better rates/deals available, i was just doing a mortgage with with a similar LTV (but different figures) so thought i would just have a quick look.

But the majority of BTLs are available through brokers really. Thats not to say the best ones are (im not saying theyre not btw - just to sit on the fence) but in order to open yourself up to the majority of deals you will need a broker.

Cheers for that

Is that a fix? If so how long for? I've seen similar, but only fixed for 2 years. That rate would only save us approx £40 a month, so only £960 over 2 years which obviously doesn't outway the fees.

Thanks

Brighty

Brighty

kingstreet wrote: »

The other thing to remember here, on a repayment mortgage of only £67,500 with 12.5 years left, the bulk of what you pay each month is capital, so the interest rate has less impact.

For example, £67,500 over 13* years at;-

4% = £555.60 per month, of which £225 is interest

2.5% = £507.25 per month, of which £141 is interest.

Therefore, you pay £48 per month less, but a higher rate taxpayer is going to lose out by £33.60 per month in higher tax on the "net profit" (which is £225 - £141 = £84 x 40% = £33.60.)

*Easier to use calc with complete years only.

Thanks Kingstreet, we're both standard rate tax payers (only just in my case), but i get your point. Maybe best to just stick with what we have for now and hope BofE rates don't shoot up. We have the option to overpay this mortgage massively (1k per month) and clear it in just a few years, but thats another thread i need to do, as to whether it's best to overpay this higher 4% mortgage by £1k per month, as it's a higher rate and exposed to BofE changes, but the downside will be higher taxable profit, or instead overpay our residential mortgages by £500 each as they are at 2.99% fixed and overpaying them will open up better ltv deals when current fix is up.

Cheers

Brighty

ACG

I think it was a 2 year fix.

To be honest, it was just a quick check. I didnt put your figures in as i say i was just doing a quote on a similar LTV so had the figures to hand.

Have a sit down with a broker, it doesnt usually cost to get a quote. You can then see if it is financially better to switch or not.