Once you have found the perfect property to invest in, there is a multitude of buy to let mortgage products to choose from. Not only are there repayment, interest-only and mixed buy to let mortgages out there, but there are also buy to let mortgages of fixed or variable interest rates, and different terms of repayment for each product. All of these deals and figures can be headache, but the best way to find the right deal for you is to read up on the available types of product, and then use an independent mortgage broker or an online mortgage comparison site to search the market for the best deal. Below are the basics of the different interest rates and terms of repayment available on the buy to let mortgage market.

Choosing between fixed and variable rates

Nearly all lenders of buy to let mortgages offer a choice between standard variable rates (SVR) or fixed rates, which are fixed at a set amount for a given period. With SVR, you are normally offered a low rate, which will stay low for a set amount of time (normally a year). After this, rates will go up to the SVR, but normally you will be tied into the mortgage by a penalty payment. This means that if you wish to move your buy to let mortgage when the low interest rate ends, but before the tie-in period, you will have to pay a redemption penalty, which is normally around 6 months’ worth of mortgage repayments. SVR buy to let mortgages are popular with buy to let borrowers. This is because you get a low rate for the first year of paying the mortgage on your property, meaning that whilst you are setting up the property, testing the water and finding good, reliable tenants, you are spared the extra expense of a high rate. Though soon the rate will go up, by that point you should have established your rent revenues, meaning you will be prepared to cover the extra cost with steady rent income. Plus, once the tie-in period is over, you are free to find a more competitive buy to let SVR mortgage, either from your current provider or a new one, meaning that you can start saving money again.
Fixed rate buy to let mortgages are different in that your rates will not suddenly change after a short period of time such as a year. This can provide you with stability and peace of mind, which is valuable when starting out in property investment. There are downsides, however; fixed rate mortgages often have longer-tie in periods, meaning that though your rate may be lower that some SVRs, it will be expensive if in a short period of time you wish to move your mortgage to another lender.

Terms of Payment

You may be able to choose how long your mortgage term is, impacting on your monthly repayments. This can make it easier if you have an interest-only mortgage as you have more time to plan how to pay back the capital sum at the end of the term. You could have longer to save for the final payment using an ISA or pension scheme. Remember, however, that most mortgage lenders require the debt to be cleared by the time the borrower is 60 years old.