No such thing as the best Buy to Let product

No such thing as the best Buy to Let product

11:13 AM, 13th August 2014, About 10 years ago 1

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What is the best Buy to Let product is one of the questions I am most often asked.

Unfortunately for me there is no answer to that question as at a guess there are probably 50 – 100 plus factors to consider when searching for the right product that will fit an individual and their circumstances.

I often liken the pricing of Buy to Let mortgages to a set of kitchen scales, what is given in one hand needs to be balanced with taking in the other.

For example there are mortgage rates that start with a 2, but you will find the arrangement fee is high and or the term of the product is short clawing back profit from the discounted initial interest rate. You may get a higher Loan to Value 80 – 85%, but the pricing is more expensive or the criteria harder to meet. It is always a case of getting the best compromise that fits your plans.

Some of the lenders criteria to consider before you can even start to drill down to the product you would like are:

  • Value of the property – Lenders have often have a minimum value
  • Amount of loan required – there are always mins and maximums
  • Loan to Value – better priced products are often restricted to lower LTVs
  • Rental income – Does the rent cover the Stress testing required for the product
  • How many investment properties do you already own
  • Employment status and income – not to cover the mortgage but just as a minimum criteria
  • Type of property – Flats and HMOs in particular have their own criteria along with new builds etc
  • Type of tenant and tenancy agreement
  • Credit history
  • Age
  • Location – Iside or Outside the M25, Scotland, Wales or Northern Ireland

And the list goes on

I have been updating our Buy to Let quote engine and calculator, which is what prompted my article as the levels of criteria for each lender are so different. There are a few products that stood out while I was doing this (see below), but there is no way I would ever recommend one product or lender over another on a generic basis.

  • 80% LTV 3.5% Libor Tracker – but the fee is 2.5% and product term 2 years
  • Lifetime Tracker 75% LTV 4.00% – but the fee is 3% and min loan size £250,00
  • 85% 3 year fixed – but the rate is 5.39% with a 6.58% reversion rate after
  • 2.69% lifetime tracker with no early repayment penalties – but maximum 65% LTV
  • 2.09% 2 year tracker – but maximum 60% LTV and 2.5% fee
  • 5 year fixed max 80% LTV – but interest rate 5.78%

As you can see there really is no free lunch and research is key to getting the best value.

You can start your own research by using our Buy to Let mortgage calculator round click here


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Mark Alexander - Founder of Property118

11:47 AM, 13th August 2014, About 10 years ago

Hi Neil

I have just commented on another thread which is very closely related to this one and asks about the tax treatment of mortgage lending fees.

I also explain a tax strategy called "fee for margin swap" - link to my comment here >>>

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