The buy-to-let mortgage market is looking pretty reasonable at the moment; there are a number of rates under 3%, many of them fixed for a couple of years. Or…are there? To combat low headline lending rates, many mortgage lenders are starting to hit landlords with big fees. How can you combat big fees and what should you be looking for when taking out your next mortgage?
It’s all Value
Fees are usually arranged as a percentage of what you’re borrowing. So, for example, the fee for taking out a mortgage on a £100,000 property could be 3% at, say £3,000, and this very quickly increases as you go up the ladder. By £500,000, you’ll be forking out over £15,000. This eats out of a good rate very quickly indeed on higher value properties, but is cheaper if you’re taking out smaller amounts. A bigger deposit could be the solution to fees in this department.
Look for Effective Rates
You shouldn’t be too drawn in to headline rates in the UK. Banking is very close to a perfectly competitive market and, really, lenders can’t afford to deviate too much from one another. A rate of 2.5% may look great, but with a 3% fee you’re soon enough looking 4% over two years. Ask your lender about the effective rate and any non-included fees – they should be able to tell you and if they don’t, you should go elsewhere.
Don’t Sign too Soon
It’s easy to get drawn in by good mortgage offerings that are supposedly short-term deals, but it’s only too late to walk away once you’ve signed. If your provider hits you with big fees you weren’t aware of after an agreement you may want to get in touch with your landlord insurance provider.
Unfortunately the buy-to-let mortgage market isn’t quite as clear as it could be, but with some careful sifting through there are good deals out there. Make sure you’re aware of all the fees, not just the headline rate, and don’t ever be afraid to walk away if someone can’t give you what you want.