5 year fixing or shorter term and refinance…??

5 year fixing or shorter term and refinance…??

9:12 AM, 4th December 2014, About 9 years ago 6

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I am just in the process of agreeing a mortgage on a BTL property, and had been heading for a 5 year fixed rate, as these seem such incredibly good value at the moment. But thinking of the principle of frequent refinancing to release equity, I wonder if this is a false move to fix for this period …? 5 year fixing or shorter term and refinance

I guess this is what everyone in the mortgage market is constantly gambling on!

When you look at the 2 year deals currently, they are so cheap compared to a while ago, and especially as refinancing costs can be offset against tax, is it always best to go for shorter term, 2 year rates if you are wanting to release equity often …???

Your thoughts will be very much appreciated



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Mark Alexander - Founder of Property118

9:17 AM, 4th December 2014, About 9 years ago

Hi Matthew

A good question to ask your broker is what the lenders criteria is for further advances.

Refinancing costs can be very high and whilst you might pay a slightly higher rate for a further advance, the difference between the two costs often favours sticking with the same lender and paying the slightly higher rate on the further advance proportion of your loan.

Obviously brokers, lenders and solicitors prefer you to refinance because this earns them a lot more money.

Howard Reuben Cert CII (MP) CeRER

10:29 AM, 4th December 2014, About 9 years ago

Oooh Mark ..... How cynical. 🙂

A mortgage 'salesman' might look at 2 yr rolling repeat income, but many 'real' Brokers consider the Client in their recommendation and I can certainly state from our own Client bank that many Clients have lifetime trackers that we arranged many years ago that we have not had repeat income from. However saying that, our Clients are grateful for that professional advice and so we are recommended by them and so I suppose additional income has been derived from that referred new business. My point is though that we should not all be tarred with the same brush.

Mark Alexander - Founder of Property118

11:01 AM, 4th December 2014, About 9 years ago

Reply to the comment left by "Howard Reuben" at "04/12/2014 - 10:29":

LOL - I can afford to be cynical now that I've retired from broking 😉

Obviously I was speaking about the majority of brokers and not those I recommend, including your good self of course!


17:00 PM, 4th December 2014, About 9 years ago

As things stand with the economy and interest rate predictions shorter term (2yr) lower rates every time if you are looking at releasing equity every so often, especially if the 5yr fixed rate is about the same (or higher) rate as the standard variable or reversionary rate after the 2yr rate ends.
Alternatively, get yourself a crystal ball and look at what is going to happen to interest rates over the next 5 years and then chose between your two options!

Colin Dartnell

0:18 AM, 5th December 2014, About 9 years ago

Reply to the comment left by "Mark Alexander" at "04/12/2014 - 09:17":

Hi Mark

I would only bother with further advances if they offer competitive rates, normally they are much higher. If you use a broker regularly negotiate with them for a percentage of their fees, I get 25% from my broker. Then look for mortgages that offer cashbacks, the two added together can almost wipe out the mortgage fees.

That way you can look around for short term mortgages without losing out on repeated fees, and possibly save up to 2% in rates.

Neil Patterson

10:21 AM, 5th December 2014, About 9 years ago

I had a personal rule from selling mortgages for many years in the past.

You need to look a customer in the eye and ask if they can afford to pay that amount, and will be happy to pay that amount for the term of the mortgage regardless of what is happening around them.

I am not sure you could genuinely answer yes to my questions above given your concerns.

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