Buy to Let Mortgage Rates
Buy to Let mortgage rates are the type of interest rate that you might pay on your buy to let mortgage.
The rate you pay will depend on the total amount you want to borrow and your general financial situation. Buy to Let mortgage rates also depend on how much rental income you expect to receive and the type of buy to let mortgage you choose to take.
There are a number of of buy to let mortgage rates, these include:
- Tracker Rates
- Discounted Rates
- Fixed Rates
- Capped Rates
Like a variable rate mortgage, a tracker follows the movement of a market rate, such as The Bank of England Base rate. The tracker rate is usually a specified percentage above this rate. This will govern what you pay back each month, eg. one per cent above The Bank of England Base rate of 3.5% (therefore you pay 4.5%). Because the tracker follows a stated rate, monthly payments can go up and down as the rate changes.
With this option a lender will offer you a discount from their standard variable rate for a specified time. If the lenders standard variable rate is 5% and the discount 2%, you will be paying back your mortgage at a rate of 3%. This option may not appeal if you wish to know exactly how much you will pay back a month. If the variable rate rises you have to pay your mortgage at a higher rate.
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With a fixed rate mortgage your monthly payments to the lender remain the same each month. The amount you pay doesn’t change for the agreed fixed rate period, even if interest rates change. Fixed rate periods usually last between two and five years, but can be longer.
Fixed Rates are great when you want to budget, and know exactly how much you will be paying for a certain amount of time. At the end of the fixed rate period your rate normally moves to the lender’s standard variable rate or a tracker rate. However, shortly before this you may opt to take a further fixed rate with your existing lender or switch to a new lender.
When you start to rent your property out we recommend that you advise HM Revenue and Customs. You’ll need to tell them about your rental income each year. You may have to pay tax on any profits you make from renting property. It may be permitted to deduct certain expenses from your profits. There has been considerable change in this area, so always consult a professional. Always take specialist tax advice where possible.
These are similar to a fixed rate mortgage but, if the lenders variable rate drops below your capped rate, your payments will be reduced.
However, should rates increase, so will your payments. But they can’t rise above the mortgage’s stated capped rate. As with the fixed rate option, charges and fees apply.