GMAC Residential Funding has designed a two-year fixed rate buy-to-let mortgage that is available for loans of up to 85 per cent of valuation.
This mortgage is fixed at 6.55 per cent until October 1, 2003 and is not available to first-time buyers. Any number of properties can be bought within a total advance of £1m and the arrangement fee is £395. Borrowers who pay the mortgage off during the fixed-rate period must pay a flat penalty of 5 per cent of the amount repaid.
Investing in property is popular as investors hit by falling stockmarkets are now looking towards bricks and mortar. However, a survey from Birmingham Midshires in August 2001 shows borrowers need to think carefully before jumping on the bandwagon. Around 55 per cent of landlords think finding the right property is the most difficult thing about buying to let and 43 per cent advise borrowers to investigate thoroughly before buying properties.
According to Moneyfacts on August 23, 2001, GMAC Residential Funding is the most competitive deal for mortgages of this type. Birmingham Midshires offers a less competitive mortgage fixed at 6.95 per cent until August 1, 2003 to all borrowers up to 85 per cent of valuation. Like the GMAC mortgage, any number of properties to be purchased within a total maximum advance of £1m.
Birmingham Midshires compares favourably with the GMAC mortgage in terms of its decreasing early redemption penalty and lower arrangement fee. Borrowers who pay off the mortgage pay 5 per cent of the amount repaid in year one as they would with the GMAC mortgage, but pay just 4 per cent in year two. The arrangement fee of £299 is £96 cheaper than GMAC's.