Due to the huge demand for private rented housing from the UK public, many private sector landlords are now choosing to expand their property portfolios by investing in new buy-to-let properties. Furthermore, it is becoming increasingly easy for landlords to get funding for these properties, as the rates on buy-to-let mortgages have been falling in recent months, whilst mortgage rates for those trying to buy a home for themselves remains the same.
However, the specialist broker Mortgages for Businesses has warned landlords that even though buy-to-let mortgage rates are enticingly low for landlords, expensive fees could actually add up to two per cent to the cost of the mortgage. They have warned landlords to look at the bigger picture when deciding to take out a new buy-to-let mortgage, especially as lender, legal, and valuation fees can soon add up. Even though average annual fees peaked in 2010 where they added an extra 0.66% to the annual average cost of buying-to-let, they have only reduced marginally to an average of 0.57%, and depending on what deal a landlord gets it could end up more.
Managing director of Mortgages for Business, David Whittaker said: “By including fees we have produced indices that more accurately reflect the costs of taking on a buy-to-let mortgage without the distortions caused by the way lenders structure fees on products to meet marketing requirements. Lender arrangement fees vary enormously. Some products carry a flat fee but most have percentage fees which can be in excess of 3%. This can make headline rates extremely misleading.”
The data Mortgages for Business produced came from an investigation of more than sixteen thousand buy-to-let mortgage products from 2008 onwards, and shows that if landlords are thinking of expanding their property portfolios they need to make sure they do the research before taking out a buy-to-let mortgage. Furthermore, those that are thinking of expanding their portfolios also need to consider additional costs, such as the cost of landlord insurance, repairs, and registration fees, which can all add up to a much larger amount than previously thought.