Tracker buy to let mortgages allow you buy a property and rent it out to the public but the interest rate you pay is tracked to the Bank of England Base Rate. So part of the interest rate you pay is the lender’s rate and the other part is the Bank of England rate. By tracking your rate, it means that if the base rate falls, which it has in recent years, your interest rate will fall too. However, this also means that if you the base rate increases, the interest rate you pay on your mortgage will increase too, leading to higher monthly payments.
Tracker buy to let mortgages are typically used by property investors and landlords to renovate a property and rent it to tenants for profit. Since the mortgage is used to raise capital, a buy to let mortgage is typically for investment purposes and landlords hope that the property will increase in value over time and can be sold at a higher amount.
A tracker buy to let mortgage pays both the capital (the cost of the property) and the interest rate (charged by the lender). This payment method is different to other mortgage options. For instance, an interest only buy to let mortgage means that you pay just the interest on your mortgage loan and then repay the capital at the end of the mortgage term. A fixed buy to let mortgage means that the interest rate you are given remains fixed during your entire mortgage term so you can plan exactly what you are going to be paying in the future.
Tracker Buy to Let Mortgages – What determines my interest rate?
A buy to let mortgage will normally incur different and often higher fees than a standard mortgage, as lenders understand that the mortgage loan required is not for a first home, but for investment purposes.
The rate and amount you will pay each month are dependent upon various factors:
Interest rates – As interest rates fluctuate, so too does the overall cost of the mortgage. The interest rates that change are the Bank of England Base Rate and this usually reflects the current state of the economy. There is also the interest rate charged by the lender and this will depend on your income and credit score.
Income – Buy to let mortgages take into account the income of the property owner. It is the yearly salary of the landlord which helps set the value of the entire mortgage. Most buy to let mortgages will be worth over 3 – 4 times the salary of the person taking out the loan.
Credit Score – Mortgage providers will look at your credit history and how well you have paid other loans and mortgages in the past and consider your debt-to-loan ratio. Those borrowers with the best credit ratings are usually able to receive lower interest rates because they have a lower risk of default.
Rent fees – Lenders will look at the amount of rent that you can potentially charge for your property. The rent charged is usually 125% of the mortgage so that the borrower pays 100% of their mortgage and that extra 25% is profit. So lenders try to calculate this taking into account the size of the property and the area it is in.
The advantages of a Tracker Buy to Let Mortgage
The benefits of a tracker buy to let mortgage include the possibility of your interest rate falling if the base rate falls too. This will mean lower monthly mortgage repayments and more disposable income.
Most of the companies we work with are able to offer ‘introductory periods’ which mean that you receive a discount on your interest rate for the first few years of your agreement.
Unlike other buy to let mortgage schemes which tie you in to set payments no matter what, tracker buy to let mortgages give you the option of changing to a cheaper fixed alternative should interest rates rise and should you change your mind and decide to fix your repayments.
Arrangement fees are typically lower for tracker mortgage rates than other fixed or interest only mortgages. You can also make early repayments to pay off your mortgage early if you have extra income – although there may be fees for doing so.
Finding a Tracker Buy to Let Mortgage with Quiddi Compare
By filling out one of our simple online forms, we will be able to find you the best deals for tracker buy to let mortgages. Additionally, you will be able to compare all of the best offers and decide which one works best for you. We will be there every step of the way as you choose your favoured tracker buy to let mortgage scheme setup from your preferred lender, helping you pay what you can afford. Our service is completely free to use and will always be free. Any details you provide are held safely on our secure server and we will never pass on your details to any third party companies.
What happens if you cannot repay your mortgage?
If you cannot keep up with your mortgage repayments, you risk damaging your credit score and possible repossession of your property. The mortgage provider gives you a lot of finance up front and if they cannot recover their cost, they are forced to sell your property to the public.
You must be very aware of the costs for a new buy to let mortgage. Not only are the mortgage repayments slightly more than you average mortgage, you need to factor in the costs of an additional renovations to the property, outgoing maintenance costs and the tenants that do not pay rent.
The advertised rate is 1.95%. However this rate will not be available to everyone and will depend on your individual circumstances and the loan to value ratio of your mortgage. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. Some partners may charge you a fee for helping you find a Mortgage or Secured Loan or other services they provide. MAKE SURE you check with the company before agreeing to any service if they charge you a fee and what the terms are. Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk QuiddiCompare does not charge a fee and does not provide any financial advice relating to mortgages. However we may on occasion receive commissions from IFA’s and mortgage providers, brokers and intermediaries for introducing you to them. The content of this site is meant to be informational, and it should not be considered financial advice. – See more at: quiddicompare.co.uk/mortgages