New landlord finance check

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    New landlord finance check

    Hello all, I'm new and have just begun the leap into commercial real estate. The deal is in progress now, I was hoping to get some feedback on my loan term options if anyone would be kind enough to comment?

    I have agreed a 60% LTV, options are 2.7% over base variable or fixed for the full term at 4%. I am swaying towards variable as I cannot see rates increasing in the near future. Mid term they could be up of course, but by that point there would have been savings made for several years to offset.

    I appreciate no one has a crystal ball, but how do the two figures compare to others you may have worked with please? Is there usually more or less of a spread between the two?

    Thank you!!

    #2
    What's the term?

    I am of the opposite view, rates are at an historic low and can't fail to rise.
    The base rate is 0.5%, do you think they can fall?
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Much depends on your classification of commercial real estate, that terminology covers a wide range. Could you clarify?

      Comment


        #4
        You could find a better interest rate below 2.7% if you study a 10 year fix from Halifax.:

        https://www.money.co.uk/mortgages/10...-mortgages.htm

        Comment


          #5
          Gordon999 has quoted a Regulated Mortgage Facility which unfortunately does not extend beyond Homeownership. This is why I enquired as to what type of commercial real estate the OP was referring to.

          Comment


            #6
            Thanks all. This is industrial with several tenants over 10 warehouses. 15 year term. My take on it is that rates are unlikely to return to 5% over the next few decades, it’s a very different climate we’re in now and a stagnant market / crash is more likely. Rates indeed could dip back to 0.5 for a while and worldwide there are several countries issuing negative rate bonds.

            making interest savings in the short term seems to make sense to me while we build up some income, which can be retained as a buffer in case of any unexpected rises.

            I should also mention that the variable can be paid off early / overpaid without penalty. The fixed rate would have penalties for early repayment.

            thanks all

            Comment


              #7
              Having researched the databases for borrowing I cannot find a lender whose interest rates for lending on Warehouses reflect those which you have been offered so I would grab either of the two options with both hands.

              Your rationale may or may not be correct in rate movements unless a crucial vote is made in favour of a certain bewhiskered man and where within 12/18 months currentrate offerings will seem a thing of the past, remember Harold Wilson’s government of ineptitude and the ramifications of their spend spend spend and the subsequent devaluation of Sterling .

              My preferred option for guaranteed rate stability would be the incredible 4% Fixed for the entire loan period which could prove to be “cheap as chips”

              Comment


                #8
                Thank you “Loanarranger”, I appreciate your input. Either way is a good deal as you suggest, 4% fixed for the whole term is tempting - it’s just going to cost £3k PA more in interest in the short term for that security.

                Comment


                  #9
                  But this is mitigated by offsetting 100% of the Mtg interest against your rental
                  given that these are Commercial Properties.

                  Comment

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