Despite buy-to-let mortgages not being regulated, the way buy-to-let mortgage information is presented to potential customers is regulated.

Any qualifying credit promotion, such as a website or advertisement, must now contain certain set information and use standardised terminology designed to help you make an informed and balanced choice.

But what do these terms mean and what are their implications?

The first piece of information investors tend to consider is the product headline rate. It is essential to understand how this rate has been calculated and to what period of time it applies.

Tracker rates will be most commonly priced as a margin above Bank of England Base Rate and less commonly as a margin above LIBOR. LIBOR stands for London Interbank Offer Rate, and forms the basis of the rate at which the banks lend each other money.

Fixed rates tend to be priced against swap rates where the lender is pricing against the market’s view on the future value of money.

If the investor understands the basis on which mortgage rates are priced, it is easier to appreciate what represents the best value. For example, a continued downward trend in swap rates will result in lenders introducing new and better priced fixed rate products.

If an investor is considering a fixed or discounted rate it is essential to know the rate the mortgage will revert to after this initial period. It is often the case that a very low initial mortgage rate will be followed by a period when the rate becomes much higher. Investors may be exposed to charges if they try to pay back or change the mortgage during this secondary period. Due to mortgage regulation any qualifying credit promotion must contain information regarding this secondary rate.

Alongside the headline rate an APR (annual percentage rate) will also appear. Be aware: this rate is an example to give an idea of the rate the borrower will pay when all the mortgage fees are included and does not represent the rate they will pay. APR will vary, dependent on fees, which in turn will vary dependent on loan size, structure and the length of term.

After the headline rate, the second consideration of the borrower will tend to be the fees involved in the mortgage transaction. The fees involved typically include:

• The valuation fee - the charge applied by the valuer for assessing the rental potential of a property
• The lender arrangement fee - a charge applied by the lender for the case administration
• Legal fees - charged by your solicitor to oversee the property purchase

SA broker fee will generally apply if you arrange your mortgage through a brokerage.

All fees, other than legal fees, should be present on any credit promotion advertising a buy-tolet mortgage. It is becoming increasingly apparent in the current marketplace that very low fixed rate mortgages are being made available, but that they are attracting a far higher arrangement fee which can be added to the overall loan, generally up to 1.5% of the loan size.

Early repayment charges, which were often referred to as early redemption penalties before the recent changes in mortgage regulation, are an equally important factor in making a mortgage decision, and again these should also appear on any mortgage promotion.

The main factor to consider is what mortgage rate or rates will apply during the early repayment charge period. Again be aware: fixed or discounted rates will often have overhanging early repayment charges. These overhanging charges mean you will still be penalised for a period after the fixed or discounted period has finished, tying you in to an extra period at a higher mortgage rate, normally the lender’s standard variable mortgage rate.

Many investors can be put off by overhanging early repayment charges.

Jonathan Moore is the marketing manager at Mortgages for Business, an independent buy-to-let broker: www.mortgagesforbusiness.co.uk