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Property Hawk
BTL mortgage strategy for landlords and property investors

Deciding on the right mortgage strategy is probably one of the most important business decisions that a landlord can make.  This is where advice from a mortgage broker can help a landlord optimize their financial strategy; particularly if they are not familiar with dealing with financial products.  Even if a landlord just taps a mortgage broker for some free initial advice it could be time well spent.

Personal circumstances

The type of buy-to-let mortgage product that is suitable for you as the landlord will very much depend on a landlord’s personal financial circumstances and also a landlord’s attitude to risk.

Landlords who are concerned that if interest rates rise that their buy-to-let payments may become unaffordable may want to consider a fixed rate buy-to-let mortgage product.  This type of buy-to-let mortgage will give a landlord the certainty of the same mortgage payment each month during the period of the fixed term regardless of what happens in the wider economy and to interest rates.

Discounted rates for short-term fix

A landlord with a short term problem over affordability; perhaps where a variable buy-to-let mortgage payments will be greater than a landlord’s rental income may want to consider a discounted buy-to-let mortgage product. In this way a landlord can make lower than normal buy-to-let mortgage repayments whilst their rental income rises and / or the general interest rate falls.  However, a landlord needs to be cautious about relying on discounted rates.  This is because if interest rates rise further and a landlord overlooks the fact that their discounted interest rate is only on a temporary footing, the ending of the discounted interest rate could cause them greater financial hardship in the long run.

Variable or tracker for the long-term

A variable rate or tracker is often the cheapest type of loan over the term of the buy-to-let mortgage.  This is because the landlord avoids paying an ‘insurance’ premium to a buy-to-let mortgage lender by not taking out a mortgage product that insulates the landlord against an unexpected interest rate rise or that gives them a preferential repayment rate.

Things to look out for.

Landlords should watch out for high product fees which even if they can be added to the buy-to-let loan can more than cancel out the financial benefits of the low introductory interest rate.  They should also make sure that once the discount period ends that their buy-to-let mortgage rate is competitive.  The other thing to watch out for is the ‘lock in’ periods associated with some buy-to-let products.  Some ‘lock ins’ will just be for the discount or fixed rate period, others extend beyond this and can be very expensive to get out of.  Landlords are advised to study the fine print carefully before taking out a buy-to-let mortgage or seek confirmation from their  mortgage broker of the exact terms.


Landlords seeking a buy-to-let mortgage should always look out for the APR (Annual Percentage Rate) on any BTL mortgage.  The APR is the measure of the true cost of the loan worked out for the entire term of the BTL loan.  This annualised rate reflects the real rate of interest any landlord & buy-to-let borrower will have to pay on their loan advance.  The APR also takes into account any fees or charges incurred in setting up the BTL loan as well as the interest rate charged on the buy-to-let mortgage once any initial discount or special term have ended.

Portfolio landlords

Those landlords with a portfolio of buy-to-let residential investment properties need to consider their overall portfolio risk when deciding on their BTL mortgage strategy.  This is because if a landlord is heavily geared (borrowed) and has all variable rate mortgages, a landlord in this circumstance is very exposed to rises in the mortgage interest rate.  In these conditions a landlord may be advised to fix the interest rates on a proportion of their buy-to-let mortgages in order to limit their exposure to higher mortgage costs bought on by rising interest rates.

Landlords who have built up a portfolio of residential investment properties during a time of rapidly rising house prices by using high lending multiples may want to consider reducing their overall lending over the long-term by changing a proportion of their interest only mortgages to repayment mortgages.  This will lower the gearing on their residential investment portfolio over time by reducing the size of their overall debt, thereby protecting a landlord against stagnating or falling house prices.

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