Gavin Richardson looks at why an attractively priced 2 year tracker buy to let mortgage is worth considering by those who normally prefer fixed rate products.
The rate is advertised as a tracker at 1.94%* for two years to 65% loan to value with an option to switch to a fixed rate.
Trackers are generally cheaper than fixed rate products, so this is a great rate as it allows you take advantage of some very keen pricing but if at some point you start to become concerned that Bank Rate might rise, you can switch to one of the lender’s fixed rate products in the range without incurring any ERCs.
Even better, when you do switch there are no additional valuation or legal fees so in effect it works in the same way as a product transfer.
Whilst we are known to favour five year fixed rates because of the certainty they provide, we know that some investors still prefer to take shorter term, cheaper products and this rate is definitely worth considering if it makes sense for you to borrow personally rather than in limited company capacity.
Will Bank Rate rise or fall?
Responding to questions last week from MPs on the Treasury Select Committee, Bank of England Governor Mark Carney suggested that the Bank could do a number of things to help stimulate the economy, if needed, including cutting interest rates to towards zero and more quantitative easing.
Whilst I doubt that in reality, Bank Rate will be reduced further, the likelihood that rates will rise in the near future has again receded to some unspecified, future date which is why tracker rates remain popular.
In fact, for the time-being at least, mortgage rates generally will remain low so now is a good time to secure a competitive rate.
In particular, if you have refinanced a property at some point over the last five years and the initial term is coming to an end (or has expired already), you should consider refinancing again now as you are likely to save money.
Back to the rate in question; here are the details:
Rate: 1.94% tracker to 30/04/2018
Overall cost for comparison: 4.4% APR
Reversion rate: Lender's Standard Variable Rate currently 4.49%
For purchases, remortgages & further advances
Max loan: £1m to 65% LTV, £1.5m at 50% LTV
Min - max mortgage term: 5 - 35 years
Repayment options: Interest only or capital & interest
Rent to interest cover: 125% @ 4.99%
Early repayment charges: 2.00% of the amount being repaid until 28/02/2017, then 1.00% until 30/04/2018 (Not due if Switch to Fix).
10% of the outstanding balance can be repaid each year without penalty.
Lender arrangement fee: £1,995 due on completion
Valuation & legal fees apply
Personal borrowers only (not available to SPV or trading Ltd Companies)
Min - max borrower age: 21 - 70 years
No minimum income requirements
Property & tenants details
Acceptable locations: England, Wales & Isle of Wight
Standard BTLs, ex LHA houses, flats over commercial property, studios
Standard ASTs including students and tenants in receipt of benefits, company lets, housing association lets
Broker fees apply – we offer a variety of fee options which are explained here. Feel free to discuss them in more detail with us directly.
If the rate is of interest, do get in touch with us to talk through how it might work for you.
Our main contact number is 0845 345 6788.
*Discounted at 1.94% = Bank of England Base Rate (currently 0.50%, variable) + 1.44 for 2 years (to 30/04/2018) reverting to Lender’s Standard Variable Rate (currently 4.49%, variable). Purchase and Remortgage. Early Repayment Charge: 2.00% of the amount being repaid until 30/04/2017, then 1.00% until 30/04/2018 (Switch to Fix option allows a customer to switch to a new fixed rate within the same product range at any time during the benefit period without incurring ERCs. 10% of the balance can be repaid each year without incurring penalties). Overall Cost for Comparison: 4.4% APR. Loan to Value: 65% for loans between £25,001 and £1,000,000. 50% for loans up to £1,500,000. Lender Arrangement Fee: £1,995 added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the interest cost calculated at a rate of 4.99%. Minimum Income Required: No requirement.
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