Author: Dave Mills
These are interesting times for mortgages, particularly in the light of the recent cut in the Bank of England base rate. I was wondering who had actually got the most out of the cut the other day, when a long standing client called me.
He called me on Friday afternoon to thank me for my advice. Back in October 2008, he purchased three buy-to-let (BTL) properties in London, for £1 million each, and took a BTL mortgage on each property. I advised him to take a lifetime tracker on each property at a rate of 0.25% below base rate which equated to a 4.75% rate (base rate being 5% at the time). He took a £500,000 interest-only mortgage on each of the properties.
By June 2009, the Bank of England base rate had fallen to 0.5% meaning his rate had dropped to 0.25%. He was now paying £104 per mortgage instead of £1,980, saving himself £5,628 per month. On 4th August, as you know, the Bank of England dropped the base rate to 0.25%, meaning his mortgages are currently at 0% and therefore his mortgage payment for each mortgage is £0! This is a total saving of £5,940 per month.
In all, since June 2009, he has paid approximately £157,500 less than he would have done if the base rate hadn’t dropped so dramatically.
In addition, over the years the rental income has steadily increased due to the market conditions in London, and he is currently making £11,400 in profit a month from these properties!!!
Whilst we cannot promise to work such magic for every one of our mortgage clients, this case does show the benefit of taking professional advice before deciding in which financial product to invest. If you need some help and advice around getting a mortgage, please don’t hesitate to give us a call on 01489 578338 or get in touch by clicking the button below.
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