25 Year fixed rate BuytoLet Mortgage

by Neil Patterson

14:15 PM, 20th August 2012
About 7 years ago

25 Year fixed rate BuytoLet Mortgage

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25 Year fixed rate BuytoLet Mortgage

The Manchester Building Society has launched two new 25 year fixed rate BuyToLet mortgage products with a 5.74%  and 5.99% notional rate.

In the years I have been working in this industry and certainly since the popular advent of BuytoLet I have never before seen a 25 year fixed rate BuytoLet mortgage. The longest term I can remember is a 10 year fixed. This is certainly very surprising and confidence boosting considering the current economic climate and I have detailed the full costs and criteria below.

5.74% fixed for the term of the mortgage:  available for repayment mortgages

5.99% fixed for the term of the mortgage:  available for interest only mortgages

(The mortgage term must be between 10 – 25 years)

Costs:

  • Interest rate 5.74% or 5.99% fixed for the term with no reversion rate
  • Early repayment charges of 1.5% for months 0-60 and 0.75% for months 61-84 (penalty is only for the first 7 years)
  • Up to 10% of the mortgage balance can be repaid each year penalty free
  • Lenders arrangement fee of only £749 and can be added to the loan as long as it does not exceed 75% LTV in total.
  • A valuation fee will be applied depending on the value of the property e.g. up to £100,000 = £235 fee
  • The overall cost for comparison is 6.0% APR at 5.74% or 6.3% APR at 5.99%

Key Lending Criteria:

  • Maximum Loan to Value 75%
  • For 5.74% fixed the Interest cover is 125% of the interest only mortgage at 5.74%. This means you can borrow up to 167.24 times the monthly rental income or
  • For 5.99% fixed the Interest cover is 120% of the interest only mortgage at 5.99%. This means you can borrow up to 160.26 times the monthly rental income.
  • Minimum Property value of £125,000
  • Applicants must not be First Time Buyers and have no more than 4 BTLs in their portfolio including the  proposed mortgage to the Manchester Building Society
  • Minimum applicant income is £30,000 for single and £40,000 for joint applications and proof is required
  • Minimum age of applicants is 30 years old
  • Only one AST is acceptable with no HMOs
  • New build properties are considered
  • No Studio flats, above commercial or over 4 stories
  • Not available in Scotland or Northern Ireland

Mark Alexander, founder of property118.com and professional portfolio landlord commented:-

“I’m just gutted that this product has been launched by a lender which prefers to target landlords with 4 or less buy to let mortgages. Why is it that some lenders prefer to deal with newbies than established portfolio landlords with nearly quarter of a century of experience like me? Now that does not make sense to me, does it make sense to you?

In my opinion a 25 year fixed rate BuyToLet mortgage is a fantastic product for professional landlords as well as newbies as it provides certainty. Rental income will no doubt rise and so will property values over a 25 year term but landlords will be able to rest assured that their mortgage interest payments and loan balances on interest only mortgages will remain unchanged.

I suspect this 25 year fixed rate BuyToLet mortgage will be a very popular product, especially as the Bank of England see’s the “natural interest rate” in the UK being around 5%. The headline rate works out at circa 2% over base for the entire term if the BoE are right. If interest rates were to reach the dizzy highs of 15% as they were in the early 1990’s this would wipe out most landlords within 6 months.

The hope for professional landlords like me is that lenders such as TMW and Paragon will spot that a market really does exist for such a product. Hopefully they will release similar products which professional landlords will be able to switch over to. Don’t you think that would make sense to them too? I’m sure this funding is priced at a higher margin than pre-credit crunch tracker products and the certainty of the rate must surely provide them with reduced risks too don’t you think?

We know that lenders read your comments so if you would like to see more products like this launched please state your reasons in the comments section below. What you say may well influence lenders decisions.”

To discuss a specific Buy to Let deal you can call us on 01603 489118 or email info@property118.com

If you would like to add your own requirements and search for the most popular available Buy to Let products please click here



Comments

10:23 AM, 22nd August 2012
About 7 years ago

Mark i totally agree with you with regard to the 25 year fixed rate bond - what a fantastic product - but why only less than 4BTL - as you say why deal with "newbies" when you can deal with proffessionals - it seems to me that the bankers are just not good business men these days!!!!!! I suppose they are persuing an upfront "damage limitation" should the rate climb higher over the years. If TMW and Paragon ever offer the same without the ridiculous constraints i would give them everything!!

Jonathan Clarke

8:01 AM, 24th August 2012
About 7 years ago

I agree a track record and experience makes you and me a much safer bet. But. My belief it is because of their - bigger they come the harder they fall attitude - towards you that makes them think the way they do .- It is also common with other lenders to limit those with the larger portfolios. They must have their reasons however bizarre and illogical it is to the likes of those with good sized portfolios.

They think they are acting like a parent and I think their fatherly chat to you would go something like this........................

`` Look I know your talented son and i want you to succeed but you are scaring me sometimes with the pace of your expansion. You can see where you are going and thats great but i simply dont have that forward thinking and absolute confidence in my own ability as i think you have. I admire you but I cant run with you on this one.
If I were like you do you think I would be sitting behind a desk all day working for the next 25 years making decisions as to whether I can lend to you or not. No - do what you do and good luck but I cant risk my job lending to you. I`m scared of my CEO sacking me. I dont have your vision I`m afraid Also I`ve seen some of those big guys crash and burn and they make the headlines and thats preyed on my mind. I know that maybe just the odd one or two and I hold a distorted picture but I`m sorry but i just feel more comfortable lending to the ones who just want to paddle in the shallow end. I`m comfortable at that level. Deep sea diving is just not for me. Sorry son``

14:15 PM, 24th August 2012
About 7 years ago

I think Manchester Building Society is being sensible in limiting this to landlords with a small number of properties and a high none rental income. It is very likely that if there is a default the landlord will have earning that can be got at with an attachment of earning order. (However there is nothing stopping a landlord buying more properties with funding from elsewhere once they have hit the 4)

I think they are really going after the market of someone buying one or two properties to fund their retirement with no intent to withdraw capital in a few years time to fund other properties. The last thing they want is customers that will be checking rate every year and making use of the
low exit charges!

The only real pain I see with this product is the minimal property value is a bit high for anyone going for a good yield. Otherwise it is just aimed at a different market then most active commenter
of property118.

16:22 PM, 24th August 2012
About 7 years ago

Yes I reckon you are absolutely correct about this product.
Which necessarily is a good thing for tenants and for borrowers looking at pension alternatives.
However if you are a pensioner and wish to draw down equity from a PPR but have a low income you are stuck.
But as you say as an alternative to paying into a pension this would be a good product.
Trouble is where does one get the 25% deposit when you have just started out.
It has to be the BOMD.
I suppose at least if they take the equity out they reduce their estate value and they can always have a voluntary charge applied in their favour by the borrower.
This stops assets they have given to a son being passed onto a divorced wife of the son if it ever happens.
Yield is the key as I don't think capital gain will count for much in the next 25 years.
Pensions are a waste of time I believe, property is the ideal pension arrangement if you can start early enough.

Mark Alexander

17:25 PM, 24th August 2012
About 7 years ago

What you and JC makes a lot of sense when you are looking at their criteria. I suspect the sat in a meeting one day and thought to themselves "who's a safe bet" then came up with the minimum age 30, minimum income etc. Good for them if that's the market they want I suppose. The bit that still doesn't make sense for me is why the lenders targeting portfolio landlords either can't or don't want to offer a long term fixed rate themselves. I am aware of one mortgage broker who disagrees that portfolio landlords would switch away from pre-credit crunched priced trackers onto this product and to some extent I can see where she is coming from. Would people really go from paying a rate today of 2.25% (i.e. BBR + 1.75%) to paying 5.99%? Possibly not. However, some of these portfolio are still buying and the differential between typical short term fixed and standard variable rates and this 25 year rate are not significant so it seems like a bit of a no brainier to me if the likes of TMW and Paragon start offering long term fixed rates and this level of pricing to portfolio landlords. If I was new to buy to let and for the MBS criteria I wouldn't even consider any other product if I was investing for the long term.

11:39 AM, 2nd October 2012
About 7 years ago

I have just seen on their T&C:
"Maximum capital raising amount of £30,000 is permitted for this mortgage product. Additional Home Improvement funds are only allowed for property to be mortgaged. "

Mimi Wade

11:44 AM, 19th July 2013
About 6 years ago

I would urge anyone doing any business with the Manchester Building Society to go through ALL paperwork with a fine tooth comb. No doubt if rates go up to around 7 or 8 % for a sustained period of time in the future, they will then bring to your attention ambiguous wording buried deep in the offer letter, hidden within another clause so as not to immediately be evident to the borrower,at the time he took out the mortgage, which they can re-interpret to suit their purposes and raise the 'fixed' interest rate. You have been warned!!


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