Reluctant landlords pay more for mortgage deals

Reluctant landlords pay more for mortgage deals

17:00 PM, 7th March 2012, About 12 years ago 1

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Let to buy mortgage lenders are inflicting stinging interest rates on reluctant landlords who have to rent out their homes to move.

Brokers and lenders say they are handling more applications from homeowners who are desperate to move because of personal or work commitments.

Reluctant landlords have a choice – either asking their lender for a ‘consent to let’ or remortgaging under a let to buy deal that gives them the funds as a deposit for another property.

Lenders granting consent to let tend to hike up the mortgage rate and charge a fee for switching the loan.

Many charge a higher rate than buy to let as they regard let to buy as a higher risk because the homeowner is not a professional landlord.

Platform, the buy to let arm of the Co-Op Bank, recently disclosed one in four mortgage applications are for let to buy loans.

The cheapest £150,000 let to buy mortgage from Platform is at 4.99% fixed for two years costing £699 per month interest only, while the Co-Op offers two-year fixed rate deals to borrowers living in their own homes at 3.29% – costing £311 per month.

Nationwide gives consent to let for £50 and after three months hikes interest rates from the standard rate of 2.5% to 4% – making payments jump by £188 from £312 to £500 per month on a £150,000 loan.

Lenders argue that renting out a home injects more risk into borrowing than when a buyer lives in the property – and that this is reflected in higher interest rates and fees.

Meanwhile, the Darlington Building Society is offering two new buy-to-let deals fixed at 3.99% until May 31, 2015 with fees of £774 up to 60% loan to value for interest-only borrowers and 70% LTV for capital repayment mortgages.

Applications are restricted to landlords with no more than three letting properties.

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20:08 PM, 12th March 2012, About 12 years ago

Mmmm I wonder what people will do; pay double the interest charges or  maybe not if they need to move but can't sell.
The lenders' preimise that renting out a property is riskier I don't believe stacks up at all.
Most of my tenants are richer than me.
I am a riskier proposition than my tenants.
It doesn't matter who pays the mortgage a tenant is just as risky as a owner.
They can both lose their jobs.
However a tenant who receive LHA to meet hopefully all the rent; a residential occupier won't, remember they will receive full rent for the 1st 13 weeks of LHA claim.
It takes 6 months before a homeowner may claim benefit to pay the interest only payment on a mortgage and then only on a loan of £10000.00
What about the capital element of a mortgage which LHA won't pay
If it isn't paid repossession; mortgage not paid for 6 months, repossession
Therefore a tenant is a far better risk to service a mortgage.
So I think you will find an owner/occupier is more of a risk to a lender.
We all know what people are doing when they become an 'accidental landlord, they are certainly NOT advising their lender!

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