Are there any reasonable BTL mortgages out there?

[ChimpMaster]

I've been looking around and BTL mortgages are damned unreasonable these days, with a high rate and arrangement fees of circa £2,000.

Has anyone here seen a more cost effective BTL mortgage?

[ContractorMoney]

Until recently, the Buy to Let (BTL)market was all but dead but lenders are slowly warming to the rental property market again and are now starting to offer more competitive rates to Contractors who are looking to invest.

I do agree that rates are still relatively high for investors, especially when compared to the deals that were on offer 3-4 years ago. All prospective homeowners are facing lending that is very restricted and lenders are increasingly urged to price for perceived risk. As such, mortgage rates are often directly linked to the ratio of loan to value (LTV) and will be progressively more expensive the lower the deposit you can find.

If you have a deposit of between 30-35% then we use a lender such as the Coventry Building Society who will offer rates as low as 3.49%. The arrangement fee is just £1000 which is very competitive when compared to the fee of 2% of the mortgage that can be paid elsewhere but if you do need a higher Loan to Value (LTV) then you will pay higher rates with far higher arrangement fees.

Assuming that you have a lower deposit, my only suggestion would be to look on the high fee as a cost of transaction which over the long term will be absorbed into the overall gains you may achieve by being able to buy in the current depressed housing market. You should have the opportunity to remortgage several times over the life of the investment and this gives you the freedom to perhaps opt for a less competitive rate now , with the view to remortgaging onto a better deal when and if you have built up a greater amount of equity in the property in the future.

A further positive is that with the well publicised restrictions on lending and lending to first time buyers in particular, rental yields have been undergoing something of a boom lately and so you could argue that now is a great time to buy .

It is important to consider that an investment property won’t offer the guaranteed return that many once believed it would. As such, a buy to let property should only be considered as a long term investment and you should factor in the need to potentially pay your mortgage during a period when you may not be able to secure a tenant.

If you are currently applying direct then you should also consider contacting an independent mortgage adviser as they should be able to compare all of the rates available, some of which may not be available on the High Street and so they should be able to find you an affordable BTL solution. Certain brokers also wont charge you a fee for their services either.