I received an email today from Shawbrook outlining their Secured BuytoLet Loans which on first glance I nearly ignored as I normally do for other second charge lenders.
On second thought though it struck me that I get a lot of questions from readers who would like to raise equity, but either do not want to remortgage as they are locked into extremely attractive tracker rates from the pre-credit crunch days, or their existing lender no longer offers further advances.
Therefore despite the high interest rate at 9.95%, which I would normally tell people to avoid, it could be possible that by not moving the whole mortgage a small amount extra on a higher rate might actually be more cost effective.
Shawbrook while only dealing direct with brokers are becoming a popular lender of choice for more difficult BuytoLet and commercial deals.
I asked Howard Reuben of HDconsultants if a lender like Mortgage Express, who are desperate to find any excuse to enforce redemption of a BuytoLet mortgage, if it was possible they would then see the borrower as in default of their terms and conditions. The response upon investigation was not clear cut:
“We have not heard of any such foreclosures on the basis that a 2nd charge was implemented, but could not state categorically that a lender would not consider this action in the future though as it is assumed that it all depends on the lenders attitude towards their borrowers at that time. However the product, which has actually been available for quite a while now, is a successful product. Borrowers should of course be advised of all potential pros and cons – which is down to the Adviser.”
Shawbrook BuytoLet Secured Loan cost and criteria:
- Interest Rate 9.95%
- Lender fee £1,250
- Maximum LTV 65% including existing mortgage
- Maximum number of properties in a borrowers portfolio of 3
- Early repayment charges 3% first 5 years and 1% thereafter
- Stress tested so rent has to cover 110% of existing mortgage and new loan
- Min Loan size £5,000 Max Loan size £75,000
- For residential investment properties only – no DSS or HMOs
- Max age 80 years old
- Max term 25 years
To summarise the costs are high, the criteria strict, the LTV low and certainly should only be considered in the right circumstances. Although as you can tell I am certainly not going to sell anyone on the idea I thought it was interesting to discuss this type of product considering my first reaction was just to delete it out of my inbox.
Please let me know what you think if you have an opinion by leaving a comment below.
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