Almas Uddin
Founder and Mortgage Advisor
01 May 2020
Comparing Cost and Time for Buy-to-Let Mortgages
If time wasn’t a pressing issue, every landlord in the country would always opt for the buy-to-let mortgage with the most affordable rate. However, there are certain situations in which a speedy deal is just as attractive as a cheap one, meaning cost isn’t always the bottom line.
Before comparing and contrasting the different aspects of cost and time when it comes to a buy-to-let mortgage, it’s a good idea to take stock of your own circumstances. This will allow you to better understand the type of mortgage deal you’re looking for, and should include an assessment of:
Your own personal annual income
Whether you possess any pre-existing properties
The type of property (residential or commercial) you want to mortgage
The standing and situation of your proposed tenants
Once you have a handle on all of that information, you can then think about what kind of mortgage you’re looking for. Would you like a fixed interest rate and if so, what timeframe would you like the rate to cover?
Those who are interested in expanding their property portfolio may prefer a shorter fixed-term period, which allows them to remortgage more quickly and therefore raise the capital necessary to buy other properties sooner. On the other hand, it might be advisable to tie yourself in to a longer-term interest rate to ensure that your financial outlook is stable for several years to come.
Many borrowers choose interest-only mortgages for their buy-to-let properties, as a means of more efficiently freeing up cashflow. If you are capable of meeting the repayment schedule with excess cash left over, it may be advisable to pay off the interest over the course of the loan, leaving you with less liability at its closure.
Having considered all of these aspects and decided which type of mortgage you’re looking for, your broker will now be able to determine which mortgage providers and products are most appropriate for your circumstances. In general, they will search for the most affordable deals, since cost is understandably the primary concern for most landlords. However, there are certain situations where time is just as crucial a factor.
For example, if the vendor is prioritising the speediness of the sale, you might not have the luxury of searching for the cheapest mortgage available, since any delay could jeopardise the entire transaction. In a similar vein, those borrowers who are looking to remortgage an existing asset in order to raise the funds necessary to invest in a new one may wish to access a product quickly so that they do not miss out on their chosen property.
In cases where time is of the essence, your mortgage broker should be able to give you an estimation of how long the underwriting processes of each provider generally take. We pride ourselves on keeping tracking of the processing times of all of the mortgage providers with whom we work, allowing us to give you a professional opinion on which is likely to be the most preferable option for you, your unique circumstances and the timeframe you’re restricted by. We’re also able to provide an informed estimation of their offer and the time that they will likely take to put forward that offer. Below, you’ll find an example estimation, based upon a standard buy-to-let mortgage application:
Mortgage provider A: Fixed interest rate at 2.95% over a five-year term, with a processing time of eight to ten weeks
Mortgage provide B: Fixed interest rate at 3.79% over a five-year term, with a processing time of six to eight weeks
As a general rule of thumb, it normally takes around four weeks for a mortgage application to be approved and completed from the date of the initial offer. Unfortunately, it’s not always the case that the mortgage provider with the cheapest interest rate will also process the offer within your desired timeframe, although it’s certainly possible.
While most borrowers prefer to tie up the mortgage arrangement as soon as possible, those who have more flexibility with regard to a deadline for doing so have greater freedom when it comes to selecting a provider who meets their needs. As with any investment decision, it should be taken after weighing up all of the associated factors, but we are always here to answer any questions you may have and provide any advice you may need to ensure you arrive at the decision that’s right for you.
Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.
NB All figures stated in the article are accurate as of 6th March, 2020
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