Property has long been considered by many as a safe investment, short-term blips and dips in the housing market notwithstanding. For many people, buying a property to let out for rental income can be quite an attractive prospect – the idea being, your mortgage payments are covered by the rental income, while the property itself appreciates in value.
Any buy-to-let investment decision should, however, be rational and considered. Balancing the likely rental income from a property in a particular location against the cost of the associated mortgage should be one of the earliest considerations for any would-be buy-to-let landlord. The buy-to-let mortgage market can also be a complex one; so, what factors should you take into account when you compare buy-to-let mortgages?
Buy-to-let interest rates
Interest rates on buy-to-let mortgages have traditionally been higher than the rates on an equivalent residential mortgage. However, over the past few years the gap has been narrowing; in February 2017 buy-to-let mortgage rates hit a five-year low, although this has been at the cost of a narrower range of products. When you compare buy-to-let mortgages remember to look beyond the high street – there are a number of smaller independent lenders who could offer some very competitive buy to let products.
When comparing buy-to-let mortgage deals it is important to remember that the lowest interest rate does not always equal the best product. Booking fees, arrangement fees and other charges should all be taken into consideration; these can range from a couple of hundred pounds to thousands, so remember to factor this in to the overall cost of the deal over the product term.
Product details and terms
Any consideration of a mortgage deal should include a holistic review of whether it is right for you and your circumstances. There is no point in being swayed by a slightly lower rate on a variable rate mortgage if your buy-to-let business and your own attitude to risk would benefit from the stability of a fixed rate. Are you looking for a two-year deal, a five-year product or a longer term? Does the product tie you in with early repayment charges in the event that you wanted to remortgage or sell the property while still in the term of the product?
Some lenders offer various sorts of incentives or rewards to attract would-be borrowers to their mortgage deals. These can take the form of either straightforward cashback payments, or payment towards a particular fee or expense – for example a free valuation, or paying a portion of the property’s Stamp Duty. This type of reward can be attractive, but always consider the bigger picture in terms of the overall product cost – a product with a £1,000 cashback incentive may not be such a good deal if there is another product available that would save you more than that in your mortgage payments over the product term.
How Just Mortgage Brokers can help.
We have years of experience with the buy-to-let market, and can help you compare buy-to-let mortgages to make sure you get the deal that is right for you. Contact us today to discuss how we can help.