First of all, let’s just explain exactly what a fixed rate buy to let mortgage actually is.
This type of mortgage is one where you would borrow money from a mortgage lender, at an interest rate fixed for a certain period (usually somewhere between three and five years), to pay for a property that you intend to rent out.
So what you are doing is borrowing money to pay for an investment. An investment that will hopefully not only grow in value over time, but also provide you with a regular monthly income in the form of rental payments from your tenants.
What happens at the end of the fixed rate period?
Photo by tim caynesUsually, when the fixed rate period comes to an end, the mortgage lender will either offer you the choice of going on to a standard variable rate (probably a couple of points over the prevailing bank base rate) or a new fixed rate for another three to five years.
Who can apply for one of these mortgages?
A number of factors are taken into consideration by mortgage lenders when evaluating applications. Here are some of the things they are likely to want to know:
- Is the property going to be used purely for rental purposes?
- Is the property in good condition?
- Will it be sub-let?
- Do you have loans against other buy to let properties?
- Are you currently over 18 and will you be under 75 when the loan matures?
Advantages of Fixed Rate Buy-to-Let Mortgages
The main advantage of a fixed rate buy to let mortgage, rather than a variable rate mortgage, is the stability and predictability of outgoings, which makes the whole process of budgeting easier. If interest rates suddenly go up, you don’t have to worry because your rate is fixed. Of course, the flip side of this is that you won’t see realise the advantages of a drop in interest rates either.
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