Buy To Let Mortgage Rates
What Buy To Let Mortgage Rates Really Mean to Landlords
Buy to let mortgage rates, like other mortgage rates, can be a minefield. It is important for landlords to understand buy to let mortgage rates so they understand exactly how their BTL mortgage repayments will work. The first area to be explained when it comes to mortgage rates is the repayment method. BTL mortgages can either be repayment mortgages, interest only mortgages or mixed repayment mortgages.
When it comes to mortgage rates and repayments, many landlords choose to go for interest only mortgages. This is because they don't tie up their capital in repaying the mortgage, leaving more money available to make new investments. This is a major advantage for the landlord who is looking to invest heavily, but it has the disadvantage of not repaying the mortgage, so unless the property increases in value they will not benefit from an increase in the equity in the house over the term of the mortgage. This option may work well for landlords who are looking to make long term investments.
Another option to look at with buy to let mortgage rates is the capital repayment mortgage. This is where the mortgage repayments consist of an interest repayment component and a repayment of some of the capital. This means that landlords accumulate equity in their properties while they are renting them out. This is a good way to kick start a good yield on a buy to let mortgage. It is also possible to mix repayment methods and enjoy the benefits of both.
BTL Mortgage Rates
As a landlord it is crucial to know what the different terms used for buy to let mortgage rates mean. Buy to let mortgage rates can be fixed or variable, and can be capped or discounted. Buy to let mortgage rates also include tracker mortgages. Fixed BTL mortgage rates mean that repayments are fixed for a certain period. This can be anywhere from six months to two years and even longer. Standard mortgages are now offering fixed rates of up to 20 years and it may soon be possible to get similar buy to let mortgage rates.
Variable mortgage rates, as their name suggests, fluctuate in line with other interest rates. The main benchmarks for a variable rate buy to let mortgage are the Bank of England's base rate (or repo rate) and the lender's standard variable rate, which may also move with the base rate.
Buy to let mortgage rates may be capped, which means they will not go above a certain rate, or collared, which means they will not go below a certain interest rate. Discounted BTL mortgage rates offer a discount off the base rate or the standard variable rate for a set period. The rate may then revert to a fixed or variable rate. Finally, buy to let mortgage rates include trackers, which track the base rate or the standard variable rate by a set percentage.
The key issue in the choice of fixed or variable buy to let mortgage rates is whether landlords want to know exactly what their repayments will be for a set period or wish to take advantage of interest rates if these fall. In the former case, a fixed rate BTL deal may be better, while in the latter the landlord may prefer a variable rate or tracker BTL mortgage. These are important aspects to consider when choosing buy to let mortgage rates.
