Yes. Buy to Let rates are higher than residential mortgage rates. Most costs, fees and charges are normally higher to. With most lenders they offer different rates with different fees, for example; some lenders offer low rates with higher fees and higher rates with lower fees. Which one to choose is easy really, you just work out the monthly payment difference between the two rates and multiply that by the term of the product, let’s say 2 years on a 2-year fixed, then if that figure comes to more than the difference between the arrangement fees then go for the one with the cheaper of the difference between the arrangement or monthly payments over that two-year period. A financial example is below:
The two figures below are not real interest rates and are used ONLY for illustration purposes
The monthly payment below is based on you borrowing £150,000 on repayment over 25 years:
2 year fixed @ 1.49% – Arrangement fee £999 – Valuation fee £0 (free) – Solicitors fees £0 (free) – Monthly payment £599.20
2 yr fixed @ 1.99% – Arrangement fee £0 (none) – Valuation fee £0 (free) – Solicitors fees £0 (free) – Monthly payment £635.05
Therefore, the difference in the arrangement fees between the two rates is £999 but the difference in the monthly payments is £635.05 – £599.20 = £35.85 so multiply this by 24 months (2 years) = £35.85 x 24 = £860.40.
So, £999 is more expensive than £860.40 so it is in fact cheaper to go on the higher rate and pay no arrangement fee in this instance.
As I said please be careful as this is not always the case so check with one of our advisers first to see which is best
Whether you choose to go on a higher or lower rate mortgage does depend on several factors like the amount of mortgage you have, the term of the mortgage and the rates and fees themselves. If you get it wrong, it could cost your thousands so please speak to one of our advisers to ensure you are getting the best deal for you