What a 5 year fixed rate buy to let mortgage offers you
If you have been keeping track of the Bank of England base rate you will have noticed that it has been at its current level since 2008. With the current signs of the economy improving there are now indications that the base rate is going to be increased at some point over the next year. Historical records show that once interest rate rises begin after a long period of stability that they often increase rapidly. Therefore this could be an indication of what could happen when interest rates start to increase next year. If you are just about to buy a new buy to let property this is something that you need to think about, and this is why a five year fixed rate could provide you with the best option.
Don’t just look at the interest rates
Many people base their decisions on the interest rates that a mortgage product has. While this may give you that amount that you will pay in interest on your mortgage, it does not take into account product fees or the mortgage deals that will be available at the end of a shorter fixed rate term. If you add up the costs of product fees, even if interest rates don’t rise, you can easily find that by taking out a longer term fixed rate mortgage at a slightly higher interest rate that you actually make savings in the longer term. If interest rates rise, the two year fixed rate deals are going to become less attractive and this could lead to you saving even more in the long term.
Things you should think about
If you do decide to go for a five year fixed rate deal on your next BTL mortgage then you need to be aware that if interest rates have increased you could suddenly face much higher mortgage payments. Therefore you should use your five years of stable mortgage payments to your advantage and save as much as you can during this time as you can then go on to decrease your loan to value ratio and so you won’t feel the effects of the end of your fixed rate term as strongly.
Where to start
Before you even start looking for a mortgage deal you will need to have all of your finances in order and you will also need proof from at least two estate agents that the property you intend to buy will provide you with adequate income to cover your mortgage. It is definitely worth your while to then go to a specialist buy to let mortgage broker in order to find the best mortgage product for you for the long term.
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