Mortgage rates for landlords are falling – but borrowers need to look at the total cost of the deal as many buy-to-let mortgages still carry expensive percentage-based fees.
Of the 306 buy-to-let products available from buy-to-let broker Landlord Centre, 155 carry percentage fees – of which 40 have a 3 per cent fee or higher. A further 117 have flat fees, while just 34 carry no fees.
For example, The Mortgage Works, the specialist lending arm of Nationwide, has the lowest two-year fix at 2.74 per cent for those with deposits of 40 per cent or more. However, it comes with a 3.5 per cent fee.
Analysis by Mortgages for Business – another specialist broker – found that the fees – such as the arrangement, valuation and legal fees – can add up to 2 percentage points to the effective annual cost of a buy-to-let mortgage.
Its research found that the effect of arrangement fees and other costs peaked in 2010, but has edged downwards in recent years.
For example, in 2010 fees for a two-year fix at 65 per cent loan-to-value would have added, on average, 1.44 percentage points to the loan, while today this has fallen to 0.78 percentage points.
“Finding the most cost-effective buy-to-let mortgage completely depends on an individual’s specific circumstances,” said Andy Young of Landlord Centre. “Borrowers should check the overall cost for comparison to find the best product to suit their own circumstances.”
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