BTL 2 yr fix vs 5yr fix - new purchase

Glover1862

I've tried the search option to find a calculation that works out what follow on rate from a 2 fix rate I would need to be worse off, or am I confusing it something else?

I'm sure this has been asked a thousand time, the figures I'm getting for a interest only loan.



2 Yr 1.94 % - Loan amount £153750 Product fee £1495.00 (£500 cashback)


5 Yr 2.39 - Loan amount £153750 Product fee £2295.00


Thanks

getmore4less

Interest only makes it relatively easy.

ignoring cash flow and interest on the difference.

£153,750 annual interest + fee
2.39% £3,675 * 5 + £2,295 = £20,670


1.94% £2,983 * 2 + £1,495 = £7,461

so for the 3 years you have

(rate/100) * 3 * £153,750 + fee = £13,209

say the fee is the same

rate = (£13,209 -£1,495 ) / (3*£153,750) = 2.54%

Glover1862

getmore4less wrote: »

Interest only makes it relatively easy.

ignoring cash flow and interest on the difference.

£153,750 annual interest + fee
2.39% £3,675 * 5 + £2,295 = £20,670


1.94% £2,983 * 2 + £1,495 = £7,461

so for the 3 years you have

(rate/100) * 3 * £153,750 + fee = £13,209

say the fee is the same

rate = (£13,209 -£1,495 ) / (3*£153,750) = 2.54%

Great, very much appreciated.

It's quite close, allows for approximately 2 x 0.25% increases, assuming rates don't go the other way or remain static.

fewcloudy

Glover1862 wrote: »

Great, very much appreciated.

It's quite close, allows for approximately 2 x 0.25% increases, assuming rates don't go the other way or remain static.

I actually think rates will remain static over the next few years, and if they move at all it will be a fall not a rise.
However you are right, it is quite close, so maybe it's worth potentially paying a little bit more than you have to, for peace of mind?

phillw

Glover1862 wrote: »

2 Yr 1.94 % - Loan amount £153750 Product fee £1495.00 (£500 cashback)

Is the £1495 fee after the cashback? Or is the effective fee £995?

Glover1862

phillw wrote: »

Is the £1495 fee after the cashback? Or is the effective fee £995?

Yes, I should have made it clearer, its £995 effective fee, I also got the rate slightly wrong on the 5 year fix, it's 2.36%. I used the formula kindly provided by getmoreforless and the figure was not massively different as one balances the other.

I decided with 5 year fix as the product has some other features which could be useful for me.