Why choose a fixed rate buy to let mortgage?

Buy to let landlords often choose a fixed rate buy to let mortgage as it offers predictable monthly payments and with it protection from interest rate rises. While this can offer easier financial planning, if rates drop then you can end up paying more interest than if you were on a variable rate. 

Fixed rate buy to let mortgage terms will last for 2, 3, 5, 7 and 10 years, require a deposit circa 20-25%, and a LTV up to 75%-80%. Interest rates will vary based on your financial profile and market conditions.

Fixed vs Variable Buy to Let Mortgages Comparison

• Monthly payments: With a fixed rate they offer stability while variable rates can change
• Risk: A fixed rate is perceived to offer less risk as your monthly payments will not change for the term of your fixed-rate deal.
• Flexibility: There is no flexibility with a fixed rate as your monthly payments will never change, however a variable rate may see those same payments rise or fall.
• Best for: In generic terms, a fixed rate provides clear certainty while variable rates can be worth exploring if you believe rates will fall over the course of the period.

Our role is to find the best mortgage deal based on your circumstances and appetite for risk.

How are fixed rate buy to let mortgages calculated?

While every mortgage lender will have their own criteria for determining how much you can borrow, they all look at the following key factors when calculating a fixed rate buy to let mortgage: 

Loan to Value (LTV) 

This is how much you are borrowing expressed as a percentage of the property value. Generally speaking, a lower LTV gives you access to more competitive mortgage interest rates and a higher LTV reduces the number of lenders available to you and usually increases the rates. 

The majority of fixed rate buy to let lenders cap their maximum loan amount to 75%. This means that even if you meet affordability criteria to borrow more, the most amount of funding you could access will still be up to 75% of the property value. 

Rental Income 

Buy to let properties should be self-funding and your mortgage product should be affordable for your current circumstances. As such, the rental income should cover the mortgage interest repayments plus any additional costs associated with running the property. 

When lenders are stress-testing your affordability, they will typically use a ICR of 145% at payrate (the mortgage rate) for individual borrowers and 125% for Limited Companies.

How to compare fixed rate BTL mortgage offers

There are three main things to consider when comparing fixed rate BTL mortgages, and the headline interest rate isn’t one of them!

Criteria – lender criteria vary enormously, so while you might be a textbook applicant for one, another wouldn’t even consider you! That’s why it’s best to start with the buy to let lenders that will consider you before you even think about mortgage interest rates.

Cost – the true cost of the mortgage is more important than the interest rate. While one product may have the lowest interest rate, it might have higher arrangement fees or additional fees that make it more expensive than a product with a slightly higher interest rate. Our bespoke buy to let mortgage sourcing system makes it easy for us to compare these costs for you.

Hidden fees – although less common now, some BTL mortgages have quirky additional terms, such as exit charges beyond the initial fixed-rate period. Our specialist mortgage experts will explain everything clearly and ensure you understand their recommendations before proceeding. Still, you and your solicitor must read over all the mortgage documentation before signing the mortgage offer.