Buy to Let
Buy to Let mortgages are specifically for buyers intending to purchase a residential property for the purpose of letting it to tenants. It allows you to invest in the property market without having to pay commercial rates of interest. However, this is a long-term investment and not only carries the responsibility of maintaining the property, but other costs such as taxes, insurance, fees and ground rent.
A variable rate mortgage will change in lock step with the bank rate and will be fixed at a specific level above the Bank of England's base rate. However, as it changes, often your interest payments will rise and fall accordingly.
- A fixed rate mortgage has a fixed rate for a period of time and is usually lower than the going rate for capped mortgages. This allows you some level of security as you know your repayments will not change during that time and you do not have to worry when interest rates rise. Most people will take on a mortgage that reflects their ability to make the payments at the current interest rates and terms.
- A capped rate mortgage is a mortgage where the interest rate is capped at a maximum level and is not allowed to go higher than this level. A capped rate mortgage will appeal to people who feel that interest rates are going to increase above the capped rate or to clients that want to take advantage of currently low interest rates, but do not want to worry about what would happen if the rates were to suddenly increase beyond what they can afford.
- A discount rate mortgage is where the rate payable is discounted by a certain amount against the lender's standard variable rate for a set period of time. As it is a direct reduction from the lender's standard variable rate, it will increase or decrease payments if the lender's base rate is altered. It is beneficial when rates are low for the initial period, but you have to watch out should the rates rise and when the discount period expires.