BTL interest rate

pascal22p

We have been offered a buy to let mortgage with a rate of 2.89% for a 5 years fix.

The rate seems all right isn't it? I have been searching on google, it's not the lowest but as we don't own our main residence plus a few credit cards.

Mortgage is about £85000 70% LTV.

Thrugelmir

Is there a product fee? Might make the rate look less attractive.

pascal22p

Yes there is, £2000.

MyOnlyPost

You need to compare total cost over fixed period including any set up and closure fee.

A simplistic approach would be 2000/60 = £33.33 pcm so a higher interest rate that doesn't increase repayments by more than this amount with no fee would be a better deal althouth there may be other factors to consider

pascal22p

I can (1) 5years @ 2.89 with £1995
or (2) 5years @ 3.24 with £995

The second one looks cheaper.
(1): 83000+1995 after 5 years the debt will be £72521
(2): 83000+995 after 5 years the debt will be £72154

Now excluding the fees (if I can pay the fee upfront):
2.89% after 5 years: £70819
3.24% after 5 years: £71299

So by paying £1000 more, I am `saving` £480... Hum, these lower rates high fees favours big mortgages I guess.

I forgot to add.
The fees are not deductible from the profit of the rent I guess. However if they are added to the loan they will be through the interest... I need to spend more time on my spreadsheet.