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I'm interested to see what peoples preferences are when it comes to selecting a mortgage.
Do people prefer to have a lower rate but then a much higher arrangement fee or a higher rate but negligible fee?
One offers a better cashflow and the other offers a better total cost
If you want the best deal, there is really no alternative to getting out your calculator and working out the total cost of the loan, including interest and fees and workout which is the better option. In my experience the rock bottom interest rates are usually not worth it due to the cost of the arrangement fee.
We run on a set formula, 5 year fixed, 75% LTV. 25 year repayment (nice to have a slight diminution of loan), factor in set up charges gives a rate to compare.
Risks? Corbyn = inflation, legislation against landlords, dramatic slowing of house mamrket, however there is such a shortage of accommodation as there would have to be a serious collapse to affect market rents. Pent up demand means some time before house prices are affected negatively.
A mortgage broker will do these calculations for you, with multiple comparison calculations against all lenders all done in one go. Our professional mortgage broker sourcing systems have all of these functions and more to help you determine overall best value, whether it's for just the special offer period or the full term of the mortgage.
The choice can also be determined by what is your priority, initial cashflow (ie lowest rate) or overall best value (Total To Pay calculation).
And it's not only about best value, if you opt for the lowest rate / highest fee and you add the fee to the loan, then when you come to remortgage in 2, 3, 5 (eg) years time, and the property value hasn't changed much, then you may be caught in a higher LTV situation which might affect your remortgage-ability.
There are so many factors to consider apart from rates and fees - flexibility, portability, overpayment features etc., are also crucial to discuss with your Broker too.
Property Tribes Financial Services can help make all of this very clear.
FOR INDEPENDENT MORTGAGE AND INSURANCE ADVICE
PROPERTY TRIBES FINANCIAL SERVICES
CONTACT US FOR LIFE INSURANCE QUOTES AND STRATEGIES. PORTFOLIO MORTGAGES (VARYING TERMS) COVERED
MULTI CREDIT REFERENCE AGENCY REPORT, IN ONE DOCUMENT HERE.
I tend to look at the total cost of the loan over the "special rate" period (e.g: 2 year fixed).
I prefer to now do all my calculations myself as have little faith in mortgage brokers (many (not all) are crooks, sorry and certainly one on here that I will not name) - at the end of the day no one will care about your money more than you.
Just do the maths - typically high fee/low rate only makes sense for very large loans and vice versa - and note that both costs are deemed finance costs for purpose of S.24.
A great question. The general rule of thumb for mortgages differs from finance theory. Finance theory would discount the cash flows back at an appropriate forward rate. For mortgages the usual rule of thumb assumes no discounting and just adds up the cost over the life of the product (occasionally the term). With low interest rates there will be little difference between the two. Rarely is tax taken into account which of course is incorrect if the mortgage purpose is for business/BTL.
For buy to let, if the yields are very low (like London), to get any leverage with the affordability restrictions you need to find a pay rate mortgage lender (5 year term usually) and use as low a rate as possible even at the expense of fees. Usually the lenders are a step ahead and have products designed to see no difference based on the earlier calculations - so pick lower rate in London.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)