LendInvest Adds 4% Fee Buy-to-Let Trackers. Does the Lower Rate Justify the Cost?

A mortgage that lets a landlord sell or refinance without an early repayment charge sounds attractive. But when the product fee is £20,000 on a £500,000 loan, the timing of that exit becomes a major part of the calculation.

LendInvest has added a 4% fee option to its buy-to-let tracker range, covering standard rental properties, small houses in multiple occupation, small multi-unit freehold blocks and holiday lets. The products offer up to 75% loan-to-value and carry no early repayment charges.

The launch, reported on 2 November, gives eligible landlords another way to balance the fee against the interest rate. For someone expecting to change their borrowing soon, however, the cheapest-looking monthly payment deserves a closer look.

Willow explored the wider case for flexible borrowing in September’s article on buy-to-let trackers. This announcement brings a more specific question into focus: how long does a landlord need to keep the mortgage before the lower rate pays back the higher fee?

The 4% fee buys a lower rate

LendInvest had already removed tracker ERCs in October. The November addition therefore expands the pricing choices within an existing flexible range.

Its rates guide dated 2 November lists standard-property two-year trackers with fees of 2%, 3% and 4%. All three have no ERCs. The larger the fee, the smaller the margin charged above Bank Rate.

This is a useful distinction for anyone drawn to the no-ERC headline. The 4% charge is not the price every borrower must pay to obtain that flexibility. In this comparison, both products offer it.

What happens on a £500,000 mortgage?

Consider an eligible landlord borrowing £500,000 on an interest-only basis. They pay the product fee separately, so the mortgage balance remains the same under both options.

Using the 3.75% Bank Rate shown in the lender’s guide, the two tracker margins produce starting pay rates of 5.75% and 4.75%. That means monthly interest of approximately £2,396 with the 2% fee, against £1,979 with the 4% fee.

The lower rate saves about £417 a month. In exchange, the landlord has paid an additional £10,000 at the outset.

Calculations are Willow’s analysis, not personalised quotes. Fees are treated as fully paid and not refunded on repayment. Totals exclude legal, valuation, broker, administration and replacement-finance costs, tax and the time value of money. The £500,000 principal must also be repaid.

For a landlord selling after a year, the lower monthly payment has recovered only half of the extra fee. The new option costs £5,000 more over that period.

This does not establish the cheapest mortgage across the market. It shows why two products from the same lender, both advertised without ERCs, can produce different results for the same planned sale.

A lower payment can still serve a purpose

Some landlords place particular value on reducing monthly expenditure. A property with substantial running costs, or a portfolio approaching a quieter period, may benefit from a smaller regular interest bill.

The distinction is between improving monthly cash flow and reducing the total cost. Paying more upfront can achieve the first without achieving the second. The investor also needs to consider what else that money might fund, such as repairs, a reserve for empty periods or another purchase.

There can also be a borrowing-capacity consideration. Lenders assess whether rent supports the mortgage using their own interest coverage calculations. A product’s assessment rate may therefore affect the available loan, alongside its pay rate. That needs a case-specific calculation; the lowest total-cost product is of little practical use if it cannot provide the required borrowing.

A changing Bank Rate affects both options

The illustration holds Bank Rate constant so the fee trade-off is easy to see. A tracker’s actual payments can move in either direction.

On an unchanged £500,000 interest-only balance, a quarter-point rise would add approximately £104 a month. If that increase applied for six months, it would add £625 to the interest bill.

Because the two illustrated products track the same reference rate, an identical change affects both. Provided their margins stay unchanged and the balances remain equal, the difference between their interest bills stays the same. Bank Rate moving does not, by itself, remove the higher fee’s two-year break-even point.

It does change the cash the landlord must find each month. Someone whose rental surplus is already narrow may place more value on a fixed payment, even if that means accepting restrictions on early repayment.

A planned sale needs a realistic timetable

A landlord preparing to sell has a clear reason to examine ERC-free borrowing. An early repayment charge can reduce the proceeds available from a sale, or make an otherwise attractive offer less appealing.

Yet a high initial fee can create its own cost when the mortgage lasts only a few months. A property expected to sell within a year needs a comparison built around that year, with a second calculation showing what happens if the buyer withdraws or completion takes longer.

The same applies to a planned refinance. An intention to secure a different mortgage after improvements or a portfolio review does not establish what lending will be available then. Valuation, rental income and the borrower’s circumstances will still matter.

The useful question is how the loan performs under a likely timetable and a delayed one. That is more revealing than choosing a product because it leaves the door open to refinancing.

Specialist properties add their own considerations

The launch extends beyond conventional single-property lettings. An HMO owner, the owner of several flats held under one freehold, and a holiday-let operator may each need flexibility for different reasons.

An HMO landlord might be reviewing which properties to retain. A holiday-let owner may be weighing a sale against another season’s income. Someone financing a freehold block may be considering changes to how the building is held or sold.

Those plans need to fit the mortgage as well as the investor’s intentions. For example, the absence of an ERC does not itself give permission to release an individual flat from a lender’s security.

The standard-property prices used above should not be read as quotes for every specialist asset. The lender lists separate categories and pricing, and the new 4% announcement specifically concerns small HMOs and small MUFBs alongside standard properties and holiday lets.

Adding the fee to the loan changes the comparison

LendInvest’s buy-to-let tariff says the product fee can be paid in advance or added to the mortgage. When added, it attracts the same interest rate as the rest of the loan.

That keeps more cash available at completion, but it increases the debt. The illustration above deliberately pays both fees separately. If fees are financed, the balances and interest bills need recalculating, and the treatment of the fee within the permitted loan and LTV must be confirmed.

Nor does no ERC mean no redemption cost. Administration, legal work and the cost of arranging the next mortgage can still affect the figures.

Compare the mortgage with the property plan

For a landlord expecting an early exit, the new range is a reason to revisit the available options. Lower-fee trackers, fixed rates and other suitable facilities belong in the same comparison, using the period the borrowing is likely to remain outstanding.

If an existing mortgage would be repaid early, its current ERC also belongs in that calculation. Fees already paid on the old loan should not be charged again in a comparison of future costs.

Willow can assess those figures alongside the property’s income and the investor’s next move. The aim is to establish what the flexibility will actually cost by the time the loan is repaid, and whether the lower monthly payment justifies the larger opening bill.