Should landlords regularly review their buy-to-let mortgage?
One of the highest costs of investing in a property to let is the mortgage.
To maximise rental profit, it is worth regularly reviewing whether your existing mortgage is offering the most competitive deal for your circumstances.
In addition to regular reviews, there are certain times when it is advisable to check the rate you are paying versus what is on the market. This may mean considering switching mortgage products and to a new lender, or renegotiating a deal with the existing lender.
When should I review my mortgage?
A key time to review mortgages is when the Bank of England changes the bank rate, as this can trigger lenders to review their mortgage interest rates. Since the credit crunch, the bank rate has been set at 0.5 per cent - one of the lowest rates experienced in decades. Prior to the credit crunch, interest rates varied from 3.5-6 per cent.
Applying the variation on this standard variable rate to a £130,000 interest-only mortgage, the monthly cost would be £579.58 at the lowest rate and up to £823.33 at the highest – a difference of £243.75 per month or £2,925 per year. This amount could take a landlord from the position of making a healthy profit to just breaking even.
The end of your deal...
Another time to review mortgage options is when a ‘deal’, such as a fixed or discounted rate, is coming to an end.
Our specialist, regulated mortgage brokers can help to monitor deals that are suitable for your circumstances, taking into account the mortgage interest rate, any penalty payments and other costs associated with switching to a new product or lender.