Updating post from Reddit.
Landlords, you’ve probably seen the buzz about The Mortgage Works (TMW) launching a shiny new 65% LTV mortgage product with a tempting 2.99% fixed rate for 2 years.
It’s available for both purchase and remortgage, and on a £100,000 interest-only mortgage, you’re looking at monthly payments of just £256.64. Sounds like a steal, right? But hold on—there’s a 3% arrangement fee (£3,000 on that £100,000 loan), and it might not be the best deal, even within TMW’s own range.
Compare that to TMW’s 4.49% 2-year fixed mortgage with no arrangement fees. The monthly payment is higher at £374.17, but you’re saving £3,000 upfront. Yes, the lower rate saves you £117.53 a month, but it would take nearly 26 months to recoup that £3,000 fee—longer than the 24-month term of the mortgage!
Here’s the key takeaway: headline-grabbing low rates aren’t always the best choice. As landlords, you know every penny counts, whether you’re expanding your portfolio or remortgaging an existing property. That’s where working with a mortgage adviser comes in. We can calculate the **true cost of a deal over the initial period**, factoring in fees, rates, and your unique situation.
You may read from this, "Broker said the higher rate TMW product is better" but don't! In certain circumstances, the 2.99% rate could be better, especially for lower loan amounts.
Sometimes, paying a fee for a lower rate makes sense—like when it improves your rental affordability calculations, helping you meet lender criteria or boost cash flow. Other times, a no-fee deal saves you more upfront and keeps things simple. It all depends on your goals, property value, and loan size.
Don’t get dazzled by a low rate alone. Reach out to a mortgage adviser to crunch the numbers and find the deal that truly works for you. Got questions or want to explore your options? The Cyborg Finance Team would love to help.
I never understand why this works. Why do LLs take 5.99%, what’s the benefit I’m missing?
In the example above, the higher monthly payments are slightly less expensive than paying a £3,000 fee—though not by much, just a few hundred pounds.
"True Cost" refers to the total mortgage costs (including monthly payments and fees) over the initial rate period, typically two years, in order to determine which option is best.
There is no single correct answer, as the costs vary depending on your loan amount.
Is the fee still fully tax deductible? It used to be.
Not since George Osborne, afaik.
Arrangement fees and interest payments are not directly deductible from rental income. Instead, both qualify for a 20% tax credit, applied against the landlord’s tax liability.
On LTD Company SPVs Both arrangement fees and interest payments are fully deductible from rental income when calculating taxable profit.
So I'm both scenarios minimize total finance costs is key, no fun to be played with tax.
That's it, the house always wins, the arrange free is ridiculous. I'm renting from a relative of mine who has the house on the market due to divorce sale. The house aint selling because the ex is rigid about the sale price.
Anyway, early termination fee on some of the deals are ridiculous so LL has to be on a variable rate. To fix a low rate there is a bullshit arrangement fee and if you sell the house early there are massive fees to pay.
The fee can be added to the mortgage. In the general scheme of things, it's not relevant. The low rate is relevant.
It's highly relevant, adding the fee to your loan doesn't make it disappear. It exists.
Yes, technically it exists, but de facto it doesn't. It's no different to paying £3k more for the property than you would have done. The money doesn't leave your bank account; you don't even need to need to pay 25% of it as part of your deposit. The only time it 'exists' is when you come to sell, and also in the amount of monthly interest (£7.50).
And BTW, it's £1995 according to Moneysupermarket.
But if you keep rolling your fees every time you remortgage you end up paying interest on fees from years ago and if you add it up over the years it can equate to thousands in interest wasted over a portfolio.
It's not going to be thousands; £1995 equates to £60 per year at 3%. In return you have £1995 in your bank account that you would not otherwise have had. If you have 10 similar properties, that would give you a deposit on another property (£20k), so you could get an 11th property 'free' so to speak.
Or to put it another way: can you make that £1995 generate more than £60 annually? If so, it's sound business sense to add it to the mortgage.
You didn't understand what I said. If you keep rolling over your fees onto the mortgage every time you remortgage like say 5 times over the course of ten years, that's 15k you're paying interest on that you have no use of and if you have multiple properties that problem is worse.
Five times in ten years is an extreme and unrealistic example. And the fee is £2k not £3k, so it would be £10k in fees, not £15k. Even in the case of your extreme example, that still only equates to £300 per year (and that's only after the fifth year; prior years will be lower because there are fewer fees).
And I think it is you has misunderstood. "that's 15k you're paying interest on that you have no use of" Of course you have use of it; it's in your bank account. You can use it as a deposit for another property.
It's closer to 3k after your mortgage advisor as TMW only arrange through advisors.
Theoretically speaking, you went through 5 mortgage changes and rolled over each arrangement fee, So you're willing to lose £300 a year unnecessarily per house or more depending on how the bank of England is feeling plus £3000 in interest for a 7% yield on a 100k property? That would leave you gross profit of £308 per month, would that be really worth it?
Bear in mind also this offer isn't around often and TMW usually charge arrangement fee as a percentage of the borrowing or a fixed price on some expensive products.
"It's closer to 3k after your mortgage advisor as TMW only arrange through advisors."
Not relevant; mortgage advisor fees have to be paid upfront regardless. They can't be added to the mortgage. But since you are quoting a £3k figure:
The £3k would be used to borrow a further 9k, so rental at 7% on £12k (pro rata: obviously you can't buy a house for £12k) would be £840 gross per year at a cost of £90 for the interest payments on the £3k.
In other words, you are paying 3% of £3k in order to receive 7% of £12k, minus the new mortgage at 3% of £9k.
So you're paying £90 per year (£3K mortgage interest) in order to receive £840 (rental at 7%) minus £270 (new mortgage interest) = £540.
Admittedly if you were mad enough to pay a fee five times in 10 years you'd end up paying £450 in interest on £15k, but to counter that, the rent would have increased significantly by then, and you would have been using the saved £15k as deposits to borrow more, and therefore generate more rental income. (Or maybe you would use the 15k in some other way: even an ISA would bring in more than 3%)
I've never been charged a percentage by TMW, always a flat fee.
The offer may not be around often, but it's the offer under discussion. If you mean that you would expect interest rates to be up at the time of renewal, they are predicted to go down three more times by the end of the year.
It may not leave your bank account, but it does come from your equity; it does decrease your net worth. In your example, you put in a 25% deposit, but it's now 24%. Don't forget it "exists" on remortgage.
The Financial Conduct Authority (FCA) dislikes added fees; they emphasised this point significantly. An adviser must demonstrate due diligence to ensure that financial services are fair and transparent for consumers. Specifically, the FCA is concerned about fees that could distort the overall cost.
"it does decrease your net worth." By exactly the same amount as paying upfront - and even then, that's only if you do absolutely nothing with the 2k that is freed up. In my example I'm using the £2k to borrow a further £6k. I will then get 7% (in my area 9% is possible) rental from £8k, i.e. £560 (gross) per annum at a cost of £60 per annum.
TBH I couldn't care less what the FCA dislikes; if the mortgage provider is offering it, I'm accepting the offer.
No debt actually exists - it’s all made up