2.39% Buy to Let Mortgage Rates!

by Mark Alexander

19:57 PM, 9th October 2014
About 4 years ago

2.39% Buy to Let Mortgage Rates!

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2.39% Buy to Let Mortgage Rates!

When I first heard that The Mortgage Works were offering a 2.39% buy to let mortgage rates I thought to myself; “yeah, yeah, yeah … here we go again … more headline rates for brokers to hook in more newbies” Buy to Let Mortgage Rates

Sure enough it comes with a 2.5% arrangement fee, it’s restricted to 60% LTV and the revisionary rate is whatever TMW decide they want it to be, because it’s not a tracker mortgage product.

At first I thought ….

Buy to Let Mortgage Rates

Who in their right mind would fall for that!

But then … in a flash … a brainstorm … or more a mind fart perhaps … something occurred to me!

If LTV’s are 65% or lower, TMW will allow second charges 😀

Now this means that a further 20% LTV layer of equity finance could be applied, thus taking the LTV to 80%.

For a speculator who wants to get in and out of a deal in a couple of years, but milk the cashflow to death in the meantime, this could be just what they have been looking for.

Same goes for anybody wanting to maximise their cashflow for a couple of years before selling up, hopefully at a profit.

Yes you’d give up 40% of any capital appreciation over that two year period to the equity financier if you sell up or refinance in two years time, but if there isn’t any capital growth the cost of the deal is less than 2.5% a year for 80% funding (plus fees of course!)

Now actually that’s not bad ……

It could also enable you to do two identical deals at 80% gearing as opposed to one at 60% gearing. That would mean that you get 60% of any capital growth, which multiplied over two deals provides 20% more than just doing one deal. On top on that you can also double up any rental profits.

And remember, there’s no monthly payments whatsoever on equity finance – great for cashflow!

Want to learn more?

Well it’s going to cost you £200, but for that we will introduce you to our recommended Equity Finance brokers and also provide you with a spreadsheet we’ve produced to help you to analyse the viability of equity finance for yourself.

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Comments

Neil Patterson

10:15 AM, 10th October 2014
About 4 years ago

Hi Mark,

I am currently updating the BTL Quote engine and calculator.

How about this one for better value !!!!

2.55% Variable for the Term of the mortgage with No redemption penalties.

Fees £1,999 but could be spread over the 10 years of the Equity release product term.

Max 65% LTV min property value 75K with Godiva.

See BTL Engine >> http://www.property118.com/buy-to-let-mortgage-calculator-2/

Mark Alexander

10:53 AM, 10th October 2014
About 4 years ago

Hi Neil

Is this the Godiva product?

If so I have a few questions .....

1) Will they allow a second charge if Equity Finance is required to top up and if so, on what conditions?

2) What's to stop them filling their boots and then increasing the rate? From what I can see, they set the interest rate, it is not pegged to to an index outside of their control such as LIBOR or BBR. My worry is that a regulator could turn up one day and tell them that they are over exposed to BTL leading them to stop lending to the BTL sector and then increasing rates to encourage borrowers to take their business elsewhere.
.

Neil Patterson

10:59 AM, 10th October 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2014 - 10:53":

1) I will have to find out

2) Absolutely nothing stopping them. However I have been following Godiva for the last 4 years and they have consistently set their rates very competitively. There are never any guarantees with any lenders eg West Brom/B of I/Skipton. A short term product you know will finish in a defined period.

Neil Patterson

11:07 AM, 10th October 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2014 - 10:53":

Hi Mark,

1) Godiva said they will allow 2nd charges, but only new 2nd charges after the completion of their first charge mortgage.

Mark Alexander

11:13 AM, 10th October 2014
About 4 years ago

Reply to the comment left by "Neil Patterson" at "10/10/2014 - 11:07":

Hi Neil

Now that's VERY interesting indeed as it means we have yet another opportunity to structure 85% funding using equity finance!
.

Ian Ringrose

12:55 PM, 10th October 2014
About 4 years ago

Two years is too short to make this of interest, as I would be giving way to match capital growth and I would not do 2 years just for yield. I would also want detailed written answers from HMRC on how the “interest” on the equity loan is offset against tax income.

Mark Alexander

13:03 PM, 10th October 2014
About 4 years ago

Reply to the comment left by "Ian Ringrose" at "10/10/2014 - 12:55":

Horses for courses Ian.

It's not a good match for my strategy either but for some it could be.
.

Colin Dartnell

23:31 PM, 10th October 2014
About 4 years ago

On the question of equity finance, (ignoring any allowances I might have), I assume I would pay Capital Gains Tax on the whole of the growth not just on the 60% that I keep.

Ian has hit something on the head, I would be interesting to know if the 40% growth given to the equity company is deductable against tax.

Even if both the above answers come back on the side of the tax man the equity finance is still a lot cheaper than borrowing from a mortgage company and the big plus is that pretty much all the costs are deferred for ten years

Mandy Thomson

10:57 AM, 11th October 2014
About 4 years ago

Hi Mark,

You've stated in your article, "If LTV’s are 65% or lower, TMW will allow second charges". Have TMW now relaxed their criteria that under no circumstances will any second charge be allowed that will take the total LTV above 60% http://www.mortgagesolutions.co.uk/mortgage-solutions/news/2269575/tmw-sets-60-ltv-cap-on-second-charge-loans?

I've just tried Googling, and whereas before I found the policy on the TMW site, I can no longer find any reference to this, so has this 60% LTV cap really now been relaxed/extended?

Mark Alexander

10:59 AM, 11th October 2014
About 4 years ago

Reply to the comment left by "Colin Dartnell" at "10/10/2014 - 23:31":

Hi Colin

The Equity Financier have confirmed that their return will be "billed" as interest when their funding is redeemed. This has yet to happen though so we are left to anticipate whether HMRC will actually allow this. If they do it is great news for higher rate tax payers who can offset the interest against their rental profits. This is because the higher rate of income tax is greater than the higher rate of CGT. However, if there are no current or future rental profits (e.g. the landlord is selling up) then the landlord may well end up out of pocket because the rental losses may not be useable but CGT would still be payable on 100% of the gain.

The best case possible scenario (EUtopia) would be if the EU was to order HMRC to allow landlords to elect whether they treat the Equity Financiers return as either interest or a share of capital. However, that's probably just wishful thinking!

Pun intended 😀
.

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