13:19 PM, 20th August 2013, About 10 years ago
After updating and writing the article on our Buy to Let mortgage sourcing system and calculator I thought I would give readers an update of what is still available and popular in the market.
You can find all these products on our system and get a quote (CLICK HERE), but many people ask me what has changed since they last took out a Buy to Let mortgage normally pre-credit crunch.
Loan to Value (LTV):
The industry standard maximum LTV is now 75% as opposed to 85% up to 2008.
You will find the cheapest rate products and and fees around the 60 – 65% LTV region with sub 3% short term rates or products with no arrangement fees and fees assisted such as Valuation and Legal cost. Eg. 2.49% 2 year fixed with 2.5% fee
80% products will tend to have higher rates around the 5% point, with increased arrangement fees and stress testing to cover the perceived increase in risk compared to lower LTV products. A popular market provider of 80% LTV products is The Mortgage Works with rates starting from 4.14% 2 year fixed with a 2.5% arrangement fee to 5.29% with a £995 fee.
85% is still available with Kent Reliance but at a cost to rates fees and criteria – 4.99% 2 year fixed product fee 2.5% and reversion rate after initial term 6.58% SVR (ouch). Minimum property value £75,000 and £25,000 applicant earned income with proof.
How much you can borrow based on the rental income aka Stress Testing has actually changed very little over the years since 2008. With reduced Loan to Values, lower property prices and increased rental income the amount you can borrow based on rent is not normally an issue unless the property is particularly poor yielding or the Loan to Value is high with a high stress testing.
The average stress testing figure is based around 5% notional rate and covering the interest by 125%. This in plain English equates to being able to borrow 192 times the monthly rental income. However at lower LTVs and interest rates this could be as much as 300 times or as little as 154 times for 80% products.
You can still borrow on Buy to Let mortgages for non standard properties such as HMO’s, new build flats, Multi-Unit, flats above none smelly or noisy commercial, however you have to be prepared depending on lender and the property for a lower LTV, higher interest rate and higher stress testing to cover the lenders perceived risk again.
Borrowing on Buy to Let mortgages in the name of a Limted company is still possible with Lenders such as Keystone, but it is preferred to be a Single purpose Vehicle rather than a Trading Ltd company and the options are vastly reduced. Therefore the tax advantages of purchasing using a Limited company can often be negated by difficulty and cost in finding finance.
Some other products not mentioned that I noted when updating the system as potentially stand out were:
3.99% 2 year Tracker Libor Tracker No Fee and Free Valuation 75% LTV
4.98% 5 year fixed £1,999 fee 80% LTV
3.49% Flexx variable mortgage for the term Fees £999 with no early repayment charge and free remortgage service and Valuation 65% LTV
4.74% Standard variable for the term No fees No early redemption penalty free valuation 65% LTV
2.99% 2 year fixed 2.5% fee 75% LTV
To Search for all the products on our own in house Buy to Let mortgage sourcing system and calculator please CLICK HERE
For any assistance you may need with a Buy to Let mortgage please email firstname.lastname@example.org
Tel: 01603 489118
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