Guide to buy-to-let product types

FIXED RATES
The main advantage of fixing your interest rate is certainty of knowing what your repayments will be for a certain amount of time. Depending upon economic conditions you may also be able to secure funding at rates which are below variable rate pricing. The downsides are the potential loss of flexibility and increased redemption penalties and or redemption terms.

VARIABLE RATES
When considering a variable rate mortgage, you should seek products from lenders who offer a visible pricing structure. For example, some lenders calculate interest rates at a margin over the Bank of England minimum lending rate (otherwise known as bank base rate). Other lenders will use the London InterBank Offered Rate (otherwise known as LIBOR) as an alternative to the Bank of England Base Rate. Many lenders prefer not to offer mortgages on these bases as they are then tied to a fixed level of profitability. However, from a borrowers perspective, a visible pricing structure is the only sure way of knowing that your lender is not going to increase your interest rate just because they have lost their appetite for a certain sector of lending. Be cautious and be sure that you know the basis of how your lender calculates their variable interest rates.

CAPPED RATES
By capping your interest rate you are effectively putting a ceiling on your interest rate but without fixing. The main advantage of a capped rate is that your interest rate can fall but not rise above a certain level for a fixed period of time. The disadvantage is that capped rates are often slightly higher than fixed rates.

BANK BASE TRACKERS
When considering a variable rate mortgage, you should seek products from lenders who offer a visible pricing structure. For example, some lenders calculate interest rates at a margin over the Bank of England minimum lending rate (otherwise known as bank base rate). Many lenders prefer not to offer mortgages on this basis as they are then tied to a fixed level of profitability. However, from a borrowers perspective, a visible pricing structure is the only sure way of knowing that your lender is not going to increase your interest rate just because they have lost their appetite for a certain sector of lending. Be cautious and be sure that you know the basis of how your lender calculates their variable interest rates.

LIBOR TRACKERS
When considering a variable rate mortgage, you should seek products from lenders who offer a visible pricing structure. For example, some lenders calculate interest rates at a margin the Londen InterBank Offered Rate (otherwise known as LIBOR). Many lenders prefer not to offer mortgages on this basis as they are then tied to a fixed level of profitability. However, from a borrowers perspective, a visible pricing structure is the only sure way of knowing that your lender is not going to increase your interest rate just because they have lost their appetite for a certain sector of lending. Be cautious and be sure that you know the basis of how your lender calculates their variable interest rates.

FLEXIBLE
The implications of redemption penalties should always be considered seriously. With a flexible mortgage, many lenders will allow you to make overpayments. This facility can be used to plan the early repayment of a mortgage. Where the level of flexibility extends to re-drawing overpayments you may utilise the facility as a "sinking fund", say for refurbishment or so that payments can be missed in the event of rental income not being generated for a period.

MINIMAL STATUS
Just because you can't prove a high level of income doesn't mean you are a bad credit risk! Many of our lenders are now starting to recognise this, for example; you may have been made redundant and have sufficient capital to live off. Alternatively your partner/spouse may have a substantial income and the finance/property may be far more efficiently placed in your name for tax reasons. Another reason maybe that you are simply unable to prove (by normal means) your true income position. Some lenders who take an open minded and sympathetic approach to such circumstances and are far more prepared to take a view based upon the viability of the property transaction rather than the income position of the applicant.

OVERSEAS
British mortgage lenders often discriminate against providing mortgages to people who do not live or work in the UK. Primarily, this is due to the fact that their mortgage approval systems are geared very heavily towards advice from the UK Credit Reference Agencies and the lenders reliance on applicants having a provable UK source of income. However, our lenders have a specialist team of brokers who are constantly updating their knowledge of the criteria of those lenders who will lend to British Ex-Patriots and Foreign Nationals wishing to raise mortgages, for letting purposes against residential property in the UK. In addition, non UK residents or non UK nationals are able to benefit from offshore and multi-currency mortgages for their property purchases in the UK or abroad.  Please see our offshore and multi-currency mortgage pages for more information - click here.