I have a portfolio of properties (most mortgaged) and one due renewal next year (5-year fix ending). Of course, the thought is rather daunting as to where the interest rates will be then, but my question is:
Do lenders let you renew with a different rate (usually a new fixed-term better rate than the one they automatically go on to after the old fixed rate ends) without additional conveyancing? As a side note mine are in a Limited Company (although I’m guessing that shouldn’t make a difference)
For example - for my own home (personal residential mortgage) - when my 5-year fixed rate ends they let me go on to a new (competitive) deal - as long as amount borrowed remains the same, then there is no conveyancing/valuation/legal fees etc - it’s great! Quick digital signature and you’re done!
So do Buy to Let lenders do the same? Please say yes!
Yes, there are usually new fixed rate offers from the same lender and Ive been re-contracting with a rate swap for the last few years. However, I dont believe this is guaranteed and I am also concerned that new offers, (or at least attractive ones) wont be available when my current deals expire, and I will be facing having to move on to a punitive reversion rate.
Yes. Though if you don’t agree with their estimated valuation you can request a new one (for a fee). Only worth doing though if you feel it will push you into a better loan to value bracket. Bear in mind though their valuation will be very cautious. I have found the house price index ones help me sometimes and actually better than the “real” value.
That is really good to know, thank you! I envisioned needing to pay my broker and solicitor fees every 5 years for each property so I’m very happy indeed! (Subject to the revised rates not being too horrendous of course!)
There usually is a fee involved with moving to a new product, even with the same lender. Ive paid on average £999 each time. You can add it to the amount borrowed thus deferring the debt if you dont have the cash now. Its also tax deductable at 20%.
When mine are due for renewal, my broker looks what my existing lender is offering and what is available on the market and I make a decision whether to switch with the existing lender or remortgage elsewhere.
As regards to lender fees, a larger fee usually means a lower rate. So, if you have smaller mortgages, it’s usually better to go for a low fee/higher rate. Larger mortgages and you are often better higher fee/lower rate. I just do a comparison in a spreadsheet and go for what gives me the lowest payment in total over the term of the fix.
Eg say 100k mortgage and 2 year fix…
Fee free and 3% would give you £6,000 to pay over the term of the loan.
£1000 fee and 2.65% would cost you £6,300 ( £5,300 to pay but £1,000 added to the loan).
So, you’d be better with the fee free, unless you desperately need lower monthly payments.
If your mortgage was £200,000 though, you’d pay £12,000 on the fee free and £11,653 on the fee version (assuming you pay interest on the fee too), so would be better paying the fee.
Obviously you actually pay £1,000 less over the period of the loan if you go for the fee added to the mortgage so monthly payments are less, but if you go for a fee your mortgage goes up by £1,000 and you pay interest on that. So, if you don’t pay the £1,000 off, you’ll be paying interest on it forever.
The fee is ‘tax deductible’ (as if extra interest, so as a finance charge) when you ‘pay’ it - ie when you add it to the mortgage.
I’ve not found a broker who offered better rates than I could find myself. Takes some effort mind! Things might be different now with how haywire rates currently are.
I question their motive IE some may push you towards products where they get most commission from lender.
I’m a Chartered Accountant so am capable of sorting my own mortgages, but the time and hassle my broker saves me with his knowledge of the market is worth every penny!