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Most buy to let products have a interest cover calculation which requires rents to be at least 125% of the monthly interest at a notional rate of 5%. To help simplify the calculation, the monthly rent can just be multiplied by 192 to give the maximum loan.
This has been the position for some time, however a new product has recently become available. For loans up to a maximum of 75% the products actual Lifetime Tracker rate of 4% is used for the 125% interest cover. This means the monthly rent can be multiplied by 240 to achieve the maximum loan.
If 70% loan to value works for you then you may be able to take advantage of a 3.70% Lifetime Tracker. This product has an interest cover multiple of a whopping 259.45 the monthly rent!
Although all borrowers must be employed or self employed there are no minimum income requirements.
The minimum loan size is £100,000 and all products come with a 3% lenders arrangement fee, which can be added to the advance.
These mortgage products are ideally suited to borrowers who don’t need cashflow from the properties they are mortgaging. Whilst gearing income at these levels is not always a good idea, for investors with very strong cashflow from other properties or significant surplus income from other sources, these products can be extremely useful. The alternative method of funding a low geared property would be to remortgage other properties onto a portfolio mortgage which assesses income across the entire portfolio as opposed to doing so on a transactional basis. Both forms of mortgage strategies have their merits, hence advice is required on which is most appropriate. The mortgages described above are often utilised by investors wishing to speculate on capital growth in lower yielding areas such as London. In some cases, some investors consider it to be worthwhile to subsidise cashflow.
Investors should always apply common sense to gearing of both LTV and income.
If you would like further details or to discuss your specific circumstances please contact me by completing the form below.
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