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Landlords: There is more to it than just the rate

by | Nov 11, 2023 | Clients

In this new financial environment, landlords need to look carefully at all the numbers associated with a loan. The headline interest rate may look attractively low, but lenders fees may not.

When a rate is fixed for 5 years or more the stress rate is calculated on the pay rate. In order to achieve a lower interest rate and therefore a higher loan advance lenders increase their arrangement fee.

Here are some scenarios using the same rental income to calculate the loan advance that can be achieved on a 5 year fixed rate, where different levels of interest rates and fees result in a very different financial outcome for investors.

Rate Arrangement Fee Gross Loan Monthly Payment Net Advance
5.69% 7% £253,000 £1,199.64 £236,448.59
6.24% 4% £230,000 £1,196.00 £221,153.84
6.74% 2% £230,000 £1,196.35 £208,823.52



The fees can sometimes frighten you away from a product but when you look deeper into the product and what it can achieve in terms of capital raise it could outweight the costs.