Is a 2 year BTL tracker a good idea at the moment?

master_ian

It's hell out there! Am trying to decide what sort of mortgage to take out: a fixed or tracker.Our mortgage will be £148,240 (BTL 15% deposit). Best fixed my broker has found is: 5.99% 5 year fixed with £995 fees = repayments will be £745/month.However, there's a Tracker for 5.13% 2 year with £3700 fees = repayments £650 (fees to be added- how do you do this? With the fixed, we will only BREAK EVEN on rent with insurance/expenses. With the tracker, who knows?Any suggestions?

dunstonh

With the fixed, we will only BREAK EVEN on rent with insurance/expenses.

You are lucky to break even. Increasingly, people are finding their mortgage payments exceed the rent (often a sign that its time to sell up as the rental yield is too low). So, at least your rental yield is a bit better.

I would go 5 year fixed as its a cheaper long term option. However, it could leave you facing high fees if you need to sell during the tie in period. With mortgaged buy to lets being high risk and low reward at this time, I am not sure I would want a five year tie in if I only had a 15% deposit. Although I would rather that than a £200 increase on mortgage payments if rates went up.

17Dave

What do you think will happen to interest rates??
UP - fixed may be best
DOWN - tracker may be best.
Why only "may" - is your crystal ball any better than mine?

If you are adding the fees they will attract interest - assuming an interest only repayment scheme.
Fixed at 5.99% the £995 will add £4.97 per month.
Tracker at 5.13% the £3700 fee will add £15.82 per month.
(These figures should be included in the monthly payment detailed on the Key Facts Sheets given to you if it says fees added - ie the balance/loan is for £148,240 plus fees.)

master_ian

Thanks 17 Dave and Dunstonh. How did you get those figures Dave? We will be keeping the property for at least 10 years. So, the 2 year tracker at £665/month, which includes the fees, (granted it may/will change on IR changes)which would give us a much healthier yield for 2 years...would be a less favorable option that the 5 year fixed?