Podcast Summary
Why don't limited company lenders offer lower interest rates for lower LTV ratios?: Limited company lenders keep interest rates the same even for lower LTV ratios below 60%, despite some investors aiming for below 50% as a risk management strategy.
While some investors aim to reduce their loan-to-value (LTV) ratios to below 50% as a prudent risk management strategy, they may not receive more favorable interest rates from limited company lenders for doing so. Benedict, a listener, brought up this question based on the discussion about the Dave Ramsey approach to buying properties in cash. The general principle behind this strategy is to minimize risk. However, Benedict noticed that below a 60% LTV, the interest rates offered by limited company lenders remain the same, regardless of how much lower the LTV goes. This raises the question: why don't limited company lenders reward this prudent approach to risk management with more generous interest rates? Stay tuned for more insights on this topic. If you have any questions or topics you'd like us to cover, don't hesitate to reach out. You can leave us a message at 013808 triple 035 or visit propertyhub.netforward/ask. We're here to help!
Lower LTV ratios in buy-to-let mortgages benefit borrowers with potentially better terms: A low LTV ratio in buy-to-let mortgages reduces risk for lenders, potentially leading to better terms for borrowers. Below 60% or 50%, the property's value being less than the loan becomes negligible for lenders.
Having a low loan-to-value (LTV) ratio in buy-to-let mortgages is beneficial for borrowers as it reduces the risk for lenders, potentially leading to more favorable terms. However, as the LTV ratio drops below 60% or 50%, the risk of the property falling in value to a point where it's worth less than the loan becomes negligible for lenders. Consequently, they may not consider this risk factor when setting mortgage rates for such clients. Another point discussed was the prediction of interest rates for 2-5 year products for limited company mortgages in the medium to long term, but no definitive answer was provided.
Preparing for potential interest rate changes: As you pay off your mortgage, lower payments can increase profit or fund portfolio expansion. Be prepared for potential future interest rate hikes.
As you pay off your mortgage and your loan-to-value ratio decreases, you may not see a lower interest rate, but you can still benefit in other ways. You could view lower mortgage payments as increased profit each month, or you could refinance and use the extra cash to expand your portfolio. Additionally, the Bank of England is expected to raise interest rates at some point in the future, although the timing is uncertain. This information may not give you an exact mortgage rate prediction, but it can help you prepare for potential interest rate changes.
Competition among lenders keeps borrowing costs low despite interest rate hikes: When interest rates rise, competition among lenders can lead to lower borrowing costs for consumers in the long run
While interest rates may increase, causing an initial rise in the cost of loans, the competition among lenders to secure a piece of the market can lead to lower borrowing costs in the long run. When interest rates rise, it's often a sign that the market is growing rapidly, and lenders become more eager to lend. As a result, they may be willing to accept smaller margins, driving down borrowing costs for consumers. Therefore, an increase in interest rates doesn't necessarily mean higher costs for borrowers in the long term. Instead, it's a sign of a robust and competitive market. Additionally, central banks may raise interest rates to curb inflation, but if they feel the market has not overheated too much, they may not keep the rates high for long. Overall, borrowers can expect some initial cost increases when interest rates rise but should anticipate lower costs in the long run due to the competitive market dynamics.
Understanding market processes and trends: Engage with podcast hosts for deeper market insights, leave reviews, and tune in for future episodes.
Gaining a deeper understanding of the processes and trends in the market can provide more confidence than just relying on specific numbers. The hosts encourage their audience to engage with them further by leaving reviews and returning for future episodes. Their appreciation for their listeners' loyalty is evident, and they look forward to continuing the conversation with everyone on their podcast. So, if you've gained value from their insights, consider engaging with them further and leaving a review. And don't forget to tune in for their next episode with Oscar and Rob.
