I’m a big fan of remortgaging on a regular basis because it opens up doors to save thousands. With new mortgage products constantly being made available, there’s always opportunities to improve on current products. So the Importance Of Remortgaging is pretty self-explanatry, and that’s exactly why it’s an aspect of one of my key strategies to being a BTL Landlord (that isn’t climbing out of debt like a chump).

I’m not a huge fan of Mortgage Advisor’s that work for Banks/Building Societies because they’re limited to their own products, so more often than not, they don’t have access to the best products on the market. However, curiosity got the better of me when they said they could find me a product better than my current one (I know, standard bullshit-spiel you expect to hear from every greasy salesman).

I’ve looked at remortgaging this particular mortgage a few times in the past, but since 2007 (when the recession hit), the products available for BTL Mortgages have been a pile of steaming shit. The interest rates for BTL mortgages have mostly been ridiculous and when they haven’t been, they’ve either been poisoned by a sky-high product fee or require a ridiculous 40% deposit.

On the back of my past experiences, I went into the meeting with no positive expectations whatsoever. I had no doubt in mind that my broker would be able to offer me a better product (as he said they would), because my current 5.7% rate is lame as hell- not exactly difficult to conquer. But I had a feeling that he wouldn’t be able to offer me anything compelling enough for me to sign on the dotted line and getting tied in for 2 years.

After my Mortgage Broker looked at the facts and figures, and did some number crunching, he enthusiastically offered me the following product:

Mortgage Offered

On the surface, a 0.6% reduction on a rate seems average at best. The rate is also fixed, so for the next 2 years I wouldn’t be affected by any changes to UK interest rates. My broker was really trying to push the product (obviously).

After carefully absorbing the offer on the table, by taking into consideration the heartbreaking product fee (£950) and the current state of the economy, the offer quickly became riddled with flaws. I’m pretty sure my broker knew he wasn’t offering me anything great (unless he was a total dumbass, which is a possibility i’m not ruling out), because let’s face it, it’s his job to know, yet he was still trying to earn his commission by trying to make me apply for it. He kept muttering, “It’s a 0.6% reduction”, and acting completely oblivious to the hefty product fee. I felt like screaming, “Shut the fuck up, and shove your 0.6% reduction up your urethra!!!” He literally said it like 6 times like I hadn’t heard the first time.

My Current Mortgage product

Why is the deal he offered a load of poppycock?

I didn’t have to do any fancy mathematics or deal with any equations beyond my means to workout why the product I was being offered was pointless.

Firstly, I calculated how much I would be paying over the next 2 years for each mortgage.

Current mortgage: £823 x 24 (months) = £19,752
Mortgage on offer: £776 x 24 (months) + (£950 product fee) = £19,574

Assuming interest rates don’t change in the next few years, I’ll be saving a pathetic £178 over the period of 2 years (even if rates climb a little, I still won’t save much at all). What’s the fucking point? The product fee killed the appeal, and chewed up the benefits of the 0.6% rate reduction. I think my broker thought he was David Copperfield of the Mortgage world- poor chap was working awfully hard to distract me with smokescreens and misdirections, so I wouldn’t take into considering the glaring £950 product fee which had kicked me in the nuts. At least, that’s the impression I got. He never included the product fee into any of his calculations, like it was a completely separate entity to the overall deal. Schmuck.

For now, I’d rather stick with my current mortgage and take my chances on interest rates holding for a while. In the mean time, I can easily look for a product that’s actually worth remortgaging for.

When are Interest Rates going to change?

Interest Rates are decided by 9 key players that form the Monetary Policy Committee (MPC). Each person votes on whether they want to increase/decrease the rate. It’s a standard voting system; decision with the overall majority is victorious.

The MPC voted 9-0 in favour of holding rates in August. The vote had been locked at 7-2 for two months and was 6-3 before that. But now, ALL 9 MPC members are wanting to hold rates. At the start of August 2011, futures markets were pencilling in early 2013 for the first increase. However, following the massive stock market turbulence and government debt fears, markets suggest the first rise will be in the summer of 2014.

Of course, this isn’t set in stone. but the fact that ALL MPC members are voting to hold rates is a pretty good indication that nothing will be shifting any time soon, as far as I’m concerned. On that basis, there’s no point in me getting a new mortgage product that will ONLY benefit me if Interest Rates rise soon. Unless the economy dramatically improves overnight, we’re in this shizzle for the long haul.

In conclusion, I’d like to end this blog post with the following final thoughts…

1) Mortgage Product fees are a fucking joke. Don’t neglect them and fixate only on the interest rate (so many people do that!!).

2) The mortgage broker I went to see is a joker. If he tries to offer me shit like that again, I’m going to… well, I don’t know, and he probably won’t be sorry, but I’ll be really frustrated. Yeaaaah!

3) Always shop around for a good deal. Don’t just talk to one institute or advisor.

4) Take into consideration the economic climate when choosing your product.

Incidentally, I looked on my Building Society’s website, and found a picture of my Mortgage Broker…

Does anyone else have any mortgage related experiences to share? You know what to do, grab the mic and say your piece by filling in the comment box below :)

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Applying For A Mortgage Policy
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Confused? Not sure about your options? Get quick and easy Buy-to-let Mortgage advice/quotes

Using the services of an experienced buy-to-let mortgage broker/adviser can be invaluable in helping you through the nuances of different lenders’ conditions, especially the small print. Additionally, specialised buy-to-let mortgage brokers usually have access to mortgage deals you wouldn’t normally be able to get, so it’s always worth talking to one to find out what rates they can offer!

Click on the button below and fill in the simple form. A fully approved UK Buy-to-let Mortgage Specialist will be in touch to discuss your options/needs, and answer any of your questions. There is no obligation and receiving the quotes is 100% free. It’s as easy as that.

What is a Buy-to-let mortgage?

A Buy-to-let mortgage is a loan for the sole purpose of purchasing a property to let.

They essentially work like regular residential mortgages. The principle is the same in the sense that you will be required to repay the loan with interest over an agreed period of time (the mortgage term).

Buy-to-let mortgages are extremely competitive

Regardless of what type of mortgage you’re after, the market as a whole is extremely competitive. Rates change every day and new products are released onto the market regularly, so it’s important to shop around and talk to a UK buy-to-let mortgage specialist that can offer free advice and quotes.

It’s important to remember, that even a tiny 0.1% difference in rate can save/cost you thousands over the mortgage period.

What’s the difference between a residential mortgage and a buy-to-let mortgage?

There are actually several differences, but I’ll cover the basics.

Firstly (and most obviously), the policies are different. Buy-to-let mortgages have specific terms and conditions for properties that are being let.

Secondly, when applying for a buy-to-let mortgage the lender will take into account the rent you will earn from the property as the primary source of income. However, lenders aren’t solely relying on the rental source as much as they used to. Since the recession, lenders are now also heavily taking into account the landlord’s personal income. Lenders still take into account the rental income, but it’s not so much a primary concern, like it used to be.

Thirdly, lenders see buy-to-let mortgages as higher risk than residential mortgages, so you should expect buy-to-let mortgages to come with higher interest rates, product fees, not to mention a requirement for a bigger deposit. Before deciding on a loan, make sure that any high product fee being paid is worth it, as many cost so much that a higher interest rate would be a better bet.

Do I need a buy-to-let mortgage to let my property?

Yes, you do. Although, a lot of borrowers do let their properties out while on a residential mortgage. However, it’s not worth the risk as the potential penalties drastically outweigh the pro’s. Specifically, having the incorrect mortgage would most likely invalidate your landlord insurance. In the event of an emergency (e.g. property burns down), you would not be covered with insurance. Most Insurers cover themselves by stating in the terms and conditions of the policy that the policyholder has the lenders permission to let.

What would happen if I get caught letting my property on a residential mortgage?

It depends on the lender, but what you’re doing essentially constitutes as “mortgage fraud” The lender could possibly do the following:

• Revoke your loan and ask for immediate redemption of the mortgage
• Automatically change your rates to a higher amount that reflects their current Buy-to-let products
• Enforce financial penalties

There should be more details on the lenders rights in the event of breaking their terms and conditions.

I want to let my current residential house, do I need to remortgage?

Not necessarily.

It’s common for people to buy a second home, while letting out their first property. In this case, you must inform your lender that you wish to let your property. In a lot of cases, it will just be a straight forward switch over. Most lenders will charge an admin fee to do so, and maybe even put you onto a new rate, but you shouldn’t need to remortgage with a new lender (unless you want to). Either way, it’s imperative to inform your current lender that you will be letting your property.

Some lenders may not allow you to let your property. In this event, you may have to remortgage. But you will also need to check to see if you’re tied into the policy.

It’s also important to remember that if you do switch to a buy-to-let mortgage, you will also need to acquire landlord insurance- standard residential building insurance will not be valid. Again, it’s best to contact your current insurer and discuss it with them first. It may just be a quick process of updating their records.

Related posts:

Using A Residential Mortgage For a Buy-To-Let Property
What Is A Tracker Mortgage?
Different Ways Of Paying Interest On A Mortgage

Oddly, people are still complaining and getting nose bleeds at the towering rate of 0.5%. That’s how desperate people have gotten. It’s sad in two senses. Firstly, it’s sad that a lot of people are genuinely struggling out there. Secondly, in a total twist, it’s sad that people were so naive to think that they could get away with buying something they ultimately couldn’t afford. If your property is 6 times more than your annual salary, alert signals should have been blinking like fucking crazy. But then again, I don’t know specific details, I’m just speculating with that one scenario. All I know is that a lot of people made a lot of stupid purchases, hence, le’ recession. It’s a contraversial issue- some people blame the banks, I blame the borrowers. Potato Pototo, Tomato, Tomoto.

It’s a bad time for savers and those caught in a fixed rates mortgage, but great for borrowers on a variable rate. Fortunately, I fall into the latter- chilling with the bunch of variable rate beneficial’s.

There are thousands and thousands of borrowers that have benefited from the drop in rates. There are even some borrowers on a 0% rate because their on a tracker plan that guarantees them a rate which is always 1% below the base rate. I wasn’t quite fortunate enough to snap up that deal, but I’m still on a few pretty good rates. Most importantly, affordable rates.

What’s the lowest rate I currently have?

Yesterday I received a letter from Birmingham Midshires informing me that following the Bank of England’s decision on 5th March 2009 to decrease the Base rate; they’ll be reducing my interest rates on the 1st April 2009 to 0.89%. That’s the lowest rate I’ve ever had.

Does anyone else have a lower rate? What’s your current rate and who’s your lender?

Related posts:

Birmingham Midshire Finally Lowered My Mortgage Interest Rate
Different Ways Of Paying Interest On A Mortgage
Birmingham Midshire Are 2 Months Behind Passing On Interest Rate Cuts

I received a letter a few days ago from Northern Rock, informing me that they are going to pass on a 0.25% cut to their standard variable rate from the 1st of Feburary.

I THINK that’s from the 0.50% base rate in January 2009. But it could be from the cut back in December. I’m not entirely sure, but the point is, Northern Rock’s SVR has officially been reduced.

The SVR was 5.34%, but has been reduced to 5.09%. Pretty sweet.

How much am I saving?

Before the cut, my monthly payments were £607.60. But now my monthly payments have reduced to £578.40. A saving of approximately £30.

Ok, it’s not much, but it’s better than nothing.

Mortgage Overpayments

While the amount of interest has reduced, i’m actually still paying the same amount each month. I’m paying &pound800 per month because I arranged to make overpayments at some point last year. That’s the entire rent, going towards the mortgage. The interest rate cut just means i’m paying off more actual debt, and paying less interest on the debt.

I’m trying to reduce as much debt as possible while debt is cheap. Eventually rates are going to go back up again, that’s a certanty. I personally believe saving money at the moment is pointless because interest rates are so low. My money will work a lot harder by reducing debt, than if it were to gather dust in a savings account.

So, what YOU say, my fellow Northern Rockers?

Related posts:

Northern Rock Lowered Thier Standard Variable Rate (SVR), Which Saved Me A Small Fortune
Northern Rock Seem Desperate To Get Me To Remortgage
Northern Rock Want Their Borrowers To Remortgage

I have three mortgages; two of which are on variable rates, and one which is on a fixed rate. Obviously, I didn’t make any savings on the fixed rate mortgage. However, the other two…

Mortgage 1

My first mortgage is a repayment plan with Birmingham Midshire. I’ve never been on a fixed rate with this mortgage, it’s always been variable. I took out the mortgage in October 2005, and my monthly payments were £782. At the time, the UK base rate was 4.5%. Payments reached its peak in September 2007, when the UK base rate was 5.75%, consequently I was making payments of £880 per month. And now, the UK base rate is 1.5%, and my monthly payment has dropped to £620. So from peak to current nadir, I’m making a monthly saving of £260. That’s pretty substantial.

Mortgage 2

Second mortgage is with Northern Rock (hah). Again, it’s repayment. I took out the mortgage in March 2007, when the UK base rate was 5.25%. At the time I was on a 2 year fixed rate deal. My monthly payments were £711. I came off the fixed rate in December 2008. I got a letter from Northern Rock in September 2008, informing me that in December I would be coming off the fixed rate consequently going onto their standard variable rate (7.49%), which would take my monthly payments up to £855. During this time the UK Base rate was 5%. But then by the time December came along, the good Lord struck and reduced the base rate to 2%. So the standard variable rate was no longer 7.49%, but 5.84%. Now, after further reductions, my rate is 5.34%, making my monthly payments £607. Ultimately, I was expecting to pay £855, but thankfully I’m paying £607. That’s a £248 monthly saving.

Overall Savings

I’m saving myself £508 per month thanks to the UK interest rate reductions.

Next Steps

1) I have a feeling interest rates will drop again in the coming months, which will hopefully have an impact on mortgage deals. I plan on remortgaging my Northern Rock plan with another lender. At the moment I could remortgage and get a much better deal than 5.34%, but I’m going to hold out because I think there’s still room for further reductions. Once I spot a good deal, I’ll hook onto it and try to secure a long-term fixed rate deal.

2) My rental income covers my mortgage monthly payments quite substantially, so I have excess cash each month. I don’t plan on saving that cash, I plan on making mortgage overpayments. My personal belief is that it’s best to reduce debt while debt is cheap, especially in this climate when house prices are falling, and negative equity becomes a reality for homeowners everyday. It’s inevitable that interest rates will eventually increase again, so debt will get expensive again. What I need to do is calculate how much I want to overpay for each property, and then inform my lenders.

Anyone else made killer savings?

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I started getting the letters approximately 4 months before I was due to come out of my fixed rate period and onto the Standard Variable rate, which at the time was like 7%. They didn’t want me as a customer, so they weren’t going to offer me a better deal.

I assume that a lot of other Northern Rock borrowers have been getting the same letters. How many of you have actually buckled under the pressure and remortgaged? The funny thing is, if I had followed their advice at the time and remortgaged as they so-desperately wanted me to, I would have shot myself in the foot. At the time, there were no good deals about (although, they were better than the 7.5% SVR NR were offering). If I remortgaged, I would have had to opt for a heart-wrenching rate, in the 6.0 per cent region, with additional product fees in an excess of £500. I would have gone for a fixed rate as well, so I wouldn’t have benefited from the recent 2.5% UK base rate slash.

I was actually coming off my fixed rate period and onto the SVR at the perfect time- just after the bank of England slashed the base rate. If the base rate wasn’t cut, I would have indeed been thrown onto the 7% rate; thankfully I got thrown onto a much more prettier rate- 5.9%. I can’t complain because that’s the fixed rate I was on anyways.

Now that i’m actually out of my fixed rate period, NR are yet again trying to get me to remortgage. This is the most recent letter I received:

Seems as though they have formed an alliance with Lloyds TSB. Looks like they have abandoned their legal and product fees for extra incentive.

Anyone else received this letter? If so, have you called to find out what products they’re offering? I haven’t called the hotline yet, but I’d be interested to find out what products they’re offering. I’d also be interested to know if any former NR borrower did remortgage just before the interest rate cuts.

On a final note, I might just hang on a little longer before I make a move, because word on the street is that there’s a high chance of a further 1% being cut off the base rate, which may either a) be passed onto the Northern Rock SVR b) introduce even better products onto the market.

Update: 22 January 2009

I got the same letter sent to me again!

Related posts:

Northern Rock Want Their Borrowers To Remortgage
Northern Rock Lowered Thier Standard Variable Rate (SVR), Which Saved Me A Small Fortune
Halifax Asked Me To Review My Northern Rock Mortgage- WHAT A WASTE OF TIME

Example

The interest rate on my repayment mortgage was 5.59%, on a 140k loan amount. My repayment on that was £877.39 pcm. Interest was £652.16. I was only paying off £225.23 pcm out of £877.39 pcm.

Due to the base rate cuts, my Standard Variable Rate (SVR) has dropped to 3.09%, consequently my repayments have gone down to £676.72. The interest I’m paying for month has gone down to £451pcm. Huge difference- it’s apparent how much cheaper borrowing has become.

I’m going to maximize on this by continuing to pay the same amount I always have been- £877.39 pcm. I’ll approximately be overpaying by £200 pcm.

The result

Without overpayment:
Time to pay off mortgage: 24 years, 6 months
Total interest I’ll pay: £58,827.85

With overpayment:
Time to pay off mortgage: 17 years, 2 months
Total interest I’ll pay: £39,768.61

(Calculations are indicative only. The actual amount saved will vary)

Massive difference, right?
Obviously it won’t pan out like that because when the property market picks up, interest rates will rise once again. However, for now, you can see the perks of making overpayments while debt is relative cheap(er).

Ultimately, I’ll be building equity a lot quicker than planned, and while house prices are slowly tumbling, that can’t be a bad thing. I know a lot of people are looking at the short term picture and thinking that lower rates mean extra short-term money in the pocket. But think about the bigger picture…it’s a lot more fruitful.

I can afford to continue paying the same rates as I always have been, so that’s exactly what I’m going to do…

Tools I used to get calculations

Mortgage Calculator
Mortgage Overpayment Calculator

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Mortgage Overpayments
Different Ways Of Paying Interest On A Mortgage
How To Avoid The Mortgage Struggle

When Northern Rock collapsed and became nationalised, they decided to try and encourage their existing borrowers to remortgage with other lenders by refusing to offer any mouth-watering products to those coming off a fixed rate term. Yes, Northern Rock want their borrowers to remortgage!! I guess the logic is to sell debt and build capital.

I was actually due to come off a 5.59% fixed rate deal in 2 weeks time (1st December), which meant I would have been thrown onto the gut-wrenching 7.5% (approximately) standard variable rate. My monthly repayments would have literally rocketed. Consequently, over the last few months I’ve been looking to remortgage. My mortgage broker has been searching high and low for a decent product. But with the financial market being in such a pathetic state, things were suddenly looking rather misty. The average BTL mortgage is between 6-7%, and there’s a huge product fee on top of that. I was preparing to swallow the harsh wrath of financial reality, whilst telling my Nan to put on a thong and stand under the street lamp post!

I know most Northern Rock borrowers (including myself) were shitting themselves about coming off their fixed rate deal because they would have had to either remortgage or pay a ridiculous interest rate.

Then, to my savior, the 1.5% base rate reduction was announced by the Bank Of England. The majority of lenders notified the public that they were going to pass on the cut to their borrowers on tracker and variable mortgages. I got a letter through on Friday from Northern Rock, informing me that my new rate in December would be 5.59% and not the 7.5% rate! What a relief!! Ultimately, that means my mortgage stays the same, and I won’t have to remortgage.

I know a lot of people have been stressing about remortgaging, but if there’s any time to get thrown onto the SVR, it’s now! There’s also a lot of speculation about interest rates being slashed further in the coming months.

Has anyone else been relieved by the 1.5% cut?

Update- quick question

Does anyone know if the 1% cut that was announced yesterday (4th December) will get passed on?

Related posts:

Northern Rock Has Passed On A 0.25% Cut To Their Standard Variable Rate
Northern Rock Seem Desperate To Get Me To Remortgage
Halifax Asked Me To Review My Northern Rock Mortgage- WHAT A WASTE OF TIME

The other day I was pleading to my readers, asking the question, Are Birmingham Midshire Cutting Their Rates? This question was instigated after the massive 1.5% baserate cut was announced by the Bank of England earlier this month.

Thanks to a reader I was informed that they actually were going to pass on the entire 1.5% cut. That was great news for me and all those on variable rate mortgage plans. I also mentioned two other things. Firstly, that Birmingham Midshire never passed on the previous base rate cut of 0.5% from back in October 2008, and that they take forever and a day to pass on the new rates.

Well, today I got a letter from Birmingham Midshire. I was actually excited when I saw the letter, and quickly ripped apart the envelope. I was eager to see my new beautiful rate. Unfortunately, the slash wasn’t as significant as I had hoped, and it certainly didn’t look like a 1.5% cut. Then I read the fine print (I skipped straight to my new monthly payment initially)- the letter was actually informing me about the 0.5% base rate cut from back in October. What does that mean? Bimringham Midshire have a 2 month delay in passing on their new rates.

I suspect that the 1.5% won’t get passed on until January. That’s a bit fucking long, innit? Anyways, I’m not THAT pissed off because it actually works out quite well, because ultimately I’ll get a bigger rate cut than expected. However, I imagine it’s a different story for those really struggling out there, and are relying on the nig 1.5% cut to get passed on immediately.

So yeah, that’s the latest on the whole Birmingham Midshire saga. I thought i’d mention it because I’ve been getting quite a bit of search engine traffic based on Birmingham Midshire. Does anyone else have any BM news, or can anyone else relate to what I’ve said?

Also, does anyone know whether taking 2 months to pass on rate cuts is standard practice for most lenders, or am I just dealing with a bunch of piss-takers?

Update- 04/12/2008

BM will pass on a cut 0.25% from the 1% that was announced on the 4th of December, 2008.

Related posts:

Birmingham Midshire Finally Lowered My Mortgage Interest Rate
Birmingham Midshire Didn’t Lower Their Rates- I’m Remortgaging
How Low Is Your Mortgage Interest Rate?

I’ve been keeping a close eye both moneysupermarket and Fool to see what the mortgage packages are currently like. Hmm…unsurprisingly, they don’t look too great, even though a few of the biggest lenders have recently lowered their rates in the recent weeks.

Here’s a snapshot of today’s mortgage deals over at moneysupermarket.com for people that want to remortgage (they don’t get any better over at fool)…

God, seriously. What is with these ridiculous interest rates and ridiculous product fees? I remember when it was easy to get a mortgage without additional fees! It seems as if they were the golden days! Also, there seems to be a requirement of extremely high deposits. It’s no wonder a lot of people are struggling, and are going to continue to do so. The baserate is currently at 5%, and there is only one rate close to that, and that’s HSBC with a 4.99% rate. However, they’re sneaky fuckers, because they want a 2.5k product fee, so the rate really isn’t 4.99% when you think about it.

As mentioned, I don’t have to remortgage until March 2009; I’m just hoping things get a little better by then. But for those that need to remortgage right now, things don’t look good great, especially for those that have very little equity in their property(ies).

Fortunately, I’ve always played the game safely; or at least, safely as I can. I’ve put down 15-20% deposits when buying property, and they’ve all been with repayment mortgages. Most BTL landlords get interest-only mortgages, and pay very little deposits. It’s a quick way of building a property portfolio, but it’s extremely risky when the market starts to get a little rough. Even the slightest change in rates can cause major strain, and that’s why a lot of people are in negative equity.

Due to my circumstances, remortgaging shouldn’t be THAT much of a problem, but my monthly outgoings will probably increase, but at a manageable rate *touches wood* Each month I build equity, and on occassion I make lump payments towards my mortgages, so that all makes the situation much better.

However, I don’t think mortgages will get worse. If anything, I think the situation will improve, because no one is borrowing right now, and lenders need to get people borrowing again. The only way people will start borrowing again is if their rates become more appealling.

What’s your situation?

I’d love to hear your remortgaging situation, people. Anyone have any tips, or discovered a real gem of a mortgage deal out there?

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The Importance Of Remortgaging
Birmingham Midshire Didn’t Lower Their Rates- I’m Remortgaging
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