Spring Bank Holiday best buy to let mortgage deals guideMake Text Bigger
Buy to let lenders say they are ready to open the floodgates to property investors looking to expand their portfolios rather than lend to first time buyers.
Mortgage lenders see less risk and more profits in buy to let because landlords borrow less to buy the same home as other buyers and investment mortgage interest rates are generally higher.
For landlords looking for more property, here’s a round up of some of the best buy to let interest rates and deals for the Spring Bank Holiday weekend:
For landlords with a deposit of 40% of the purchase price:
- Principality Building Society
3.19% until April 30, 2013 variable (Current SVR 4.99%). Fee: 2.5% of advance.
- BM Solutions
2.75% (Bank rate plus 2.25% for one year). Fee 3% of advance.
For landlords with a 20% deposit looking for a 80% loan-to-value mortgage:
- Yorkshire Bank
4.99% variable. Fee: £999.
- Market Harborough Building Society
4.85% Fixed until June 30, 2013. 70% loan-to-value.
Fee £750 arrangement fee and £95 booking fee.
The Mortgage Works offers ‘light’ refurbishment finance at 70% loan to value for experienced landlords and 65% loan to value for first time landlords with a £595 arrangement fee.
- Godiva Mortgages
4.49% fixed until March 31, 2013 at 60% loan-to-value.
Fees: £250 booking fee and £999 arrangement fee.
Before placing any offer on a property, be sure to find out the expected rental return, as the amount a buy to let lender is ready to advance depends on ‘rent cover’.
The general formula is to take the typical rent, divide by 4 and multiply by 5. For example, £600 rent a month provides rent cover of £750 (650/4 x 5)
Next, compare the rent cover with the monthly mortgage interest at 5%. If the rent cover is equal to or higher than the interest figure, the deal is viable – if not, the lender will limit the loan to the rent cover level, leaving you to find a larger deposit.
So, our property generating £600 rent is valued at £150,000. The lender offers a 70% loan-to-value deal, with an advance of £105,000. Interest at 5% on the loan is £5,250 a year or £437 a month, which is well inside our rent cover amount.
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