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Godiva the specialist buy to let arm of the Coventry Building society is bringing capped rates back into the market after their disappearance during the credit crunch.
A capped rate is a variable mortgage that can move up or down with fluctuations in interest rates, but will not increase beyond the “capped” pay rate during the term of the product. The advantage is that you can take a potentially cheaper variable rate without the risk of it increasing beyond a defined interest rate.
Demand for, and supply of, capped rates stopped when the credit crunch took hold and the Bank of England Base rate reduced in stages down to 0.5% and did not look like recovering in the short term. In the example product below the Bank of England base rate would have to increase above 2% during the 2 year term for the cap to be enforced.
Product detail and criteria for Godiva 5.3% Capped rate
Bank Base Rate (currently 0.5%) plus 3.3% until 30.07.14 meaning you will pay a rate of 3.8% variable capped to a maximum pay rate of 5.3%.
Reversion rate after the initial 2 year period is the Godiva Standard Variable Rate for the remainder of the mortgage, which is currently 4.74%.
Overall cost for comparison 4.8% APR.
Maximum Loan to Value 65%.
Arrangement fee of £999 can be added on top of the maximum 65% LTV and a Booking fee of £250 paid on application.
Incentives included are a Remortgage Transfer Service and one mortgage valuation up to £700.
Early repayment charges are 3% of the balance repaid until 30.07.14.
The amount you can borrow is calculated by the monthly rental income having to cover the interest only mortgage payment by 125%. This gives you the ability to borrow up to 252.63 times the property’s monthly rental income as assessed by the lender’s valuation survey up to 65% LTV.
Maximum loan amount £500,000 over 50% LTV and Minimum loan amount £25,001.
Minimum income £25,000 for sole applicants, or £30,000 for joint.
Must already own UK property (not available to First Time Buyers).
No HMOs with the exception of student lets up to a maximum of 4 students.
Cost over the 2 years not including incentives on a £100,000 interest only advance = £8,924.92 To see how this is calculated click here for previous article “How to choose a Buy to Let mortgage based purely on cost”
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