Tag Archives: BTL

85% LTV at 110% interest cover Buy to Let – InterBay Commercial Buy to Let News, Landlord News, Latest Articles

InterBay Commercial part of OneSavings Bank plc group have introduced a new Buy to Let range and of real interest for the market is an 85% Loan to Value product stress tested at 110% interest cover on the pay rate.

This means that the amount you can borrow  is worked out by the monthly rental income needing to be 110% of the monthly interest only payment subject to the 85% maximum LTV.

E.g. max loan = monthly rental income x 12, divided by pay rate %, divided by 110%

Therefore in this example: max loan = rent x12, divided by 6.1%, divided by 110%

or as an easy calculation max loan = monthly rent x 178.83 (this is very competitive considering the high 85% LTV)

The product:

  • 6.1% Libor Tracker = 3 month Libor (min rate 0.75%) plus 5.35% for the term
  • Maximum 85% LTV
  • 2% arrangement fee (additional 1% fee if loan below £75,000)
  • HMOs and New build flats maximum 75% LTV
  • Interest Only available up to a maximum 10 year term, but available for longer with a 0.5% rate loading
  • Early repayment charge 3% for first 5 years and 1% for the life of the loan
  • Minimum 2 years BTL experience (no First time landlords)
  • Available to individuals, limited companies, LLPs and Partnerships
  • Max loan size £1million

This now gives an alternative for Buy to Let investors at 85% LTV if your circumstances do not fit criteria for Kent Reliance who offer a similar product at 4.89% two year discount, with a 2.5% fee and you can borrow 192 times monthly rental income. However the reversion rate after 2 years is currently 6.58% so may not be as good value over a longer term if rates stay low.

I have been told that Interbay use a more flexible commercial approach to Buy to Let lending which could be an advantage in more complicated situations.

InterBay Commercial will only deal with authorised introducers and not the general public.

For assistance with this or any property finance requirements please, call us on 01603 489118 or email info@property118.com

If you would like to add your own requirements and search for the most popular available Buy to Let products please click here interbay commercial


Residential mortgage but renting the property without consent! Latest Articles

Hello readers,

For the last 3 years I’ve rented my flat on a residential mortgage whilst simultaneously living in a rented house. This is because of a change of a job which meant I had to move. I however couldn’t sell the flat due to negative equity. The flat contains roughly 15% equity and I have some savings.

I’m aware that I shouldn’t have done this, but the alternative was to default on the mortgage.

I want to get this sorted ASAP because it is now giving me sleepless nights. My options are therefore:

1) My current tenant has expressed some interest to buy from me, but lacks savings. I could therefore pay his deposit on a mortgage for him

2) Look for a BTL – this would need to be between a 75% to 80% LTV! ideally 80%, which seem difficult to get because I’m renting myself

3) Bury my head in the sand and hope that my mortgage provider doesn’t find out.

2 is probably the most likely outcome. If I did choose 3, if they did find out, would this make it difficult for me to simply switch to a BTL with someone else, should my mortgage provider call in the mortgage?

Many thanks Darren underthecosh


Mortgage Express Harsh Realities re Mortgage Arrears Latest Articles, UK Property Forum for Buy to Let Landlords

It would appear that Mortgage Express are now operating a zero tolerance policy on buy to let mortgage accounts which fall two or months into arrears.

In recent months I have heard of several landlords who feel hard done by.

After just two months of mortgage arrears have accumulated Mortgage Express have called in their loans. Repayment of arrears does not appear to save people at this point. It’s too late! Mortgage Express have called their loan in and that’s their right to do so. Mortgage Express will happily accept payment for the mortgage arrears but they are not legally compelled to reverse their decision on calling in their mortgages. Some lenders are more tolerant but tot Mortgage Express it would seem. They have their instructions and they are sticking to them. Their objective is to recover as much money as possible – END OF STORY!

In the examples I have seen Mortgage Express has called in LPA Receivers to collect rents until such a point as tenants can be evicted and the property is then sold. Any surplus of sale proceeds over and above the mortgage and accumulated costs is then offset against any other Mortgage Express accounts which are also called in under their rights to consolidate. Once all Mortgage Express accounts are cleared any surplus balance is then returned to the borrower. However, in all of the cases I have seen to date there has been a deficit and Mortgage Express have then pursued this too, in many cases leaving their former borrower with little if any choice other than to consider personal bankruptcy.

Mortgage Express Harsh Realities

I have been asked by several borrowers whether I would be prepared to fight this for them. Whilst I think the situation is particularly harsh on both borrowers and tenants, now that I understand what is actually happening here I cannot see that anything illegal is being done by Mortgage Express.

It’s harsh but apparently it’s what all Mortgage Express buy to let borrowers signed up to.

The message therefore is do not fall into arrears on your Mortgage Express accounts.

It seems clear to me that Mortgage Express are now coming under massive pressure to call in mortgages which are in default. In my cynical opinion, that is the only reason they want to meet with their borrowers. It’s a fact finding exercise whereby they present opportunities for their borrowers to admit to being in default, other than for mortgage arrears.

My advice to all Mortgage Express borrowers is to read your terms and conditions very carefully and to follow them to the letter. If Mortgage Express want a meeting then ask them to confirm in writing what gives them the their rights to insist on a meeting and immediately seek professional advice. Also remember that if your tenants don’t pay you that’s not an acceptable excuse for not paying your mortgage. In fact, there is NO acceptable excuse I can think of other than Mortgage Express not taking payment. Therefore, if you haven’t got a decent liquidity fund I strongly recommend that you fully reference your tenants and purchase insurance against the risk of your tenants not paying your rent.

If it makes you feel any better the latest take on the word Gangsters in Banksters!


Property Research Tool Latest Articles

UK Property Research Tool
What you need to know and where to find the information

This Property Research Tool is for the benefit of all property buyers, landlords, tenants, owner occupiers and professional advisers associated with property.

Thanks to business sponsors and Property118 Members for their incredibly generous donations making the development of this Property Research Tool.

Property Research generally begins online

Far too many people fall into the trap of not doing proper online research, they see a property they fall in love with or meet a sales person they trust and the deal is done. For those of us who have learned our lessons the hard way, it still takes a long time to wade though websites to complete thourogh due diligence. The really annoying part for me was finding each website individually and then having to enter the same postcode into each one over and over again to find the right pages. For these reasons I wanted to have a system built as a convenient Aide-mémoire (check-list) for every internet user to be able to use and to provide access to to the websites containing vital information with the minimum number of clicks. Property Research Tool

Essentially the Property Research to is a pop up page, called a modal, which consolidates key information used by landlords and other property purchasers to assess properties. Any website can incorporate this technology free of charge. The functionality works best with Google Chrome and Safari internet browsers.

The only data input for users is the Post Code of the area. The key benefit is the ability to access all information required to complete desktop due diligence without having to remember visit multiple websites, thus saving considerable time and effort. The information is called from several websites which provide insight into the location being searched.

Enough of me trying to explain what it is, why not see for yourself?

If you run a website yourself why not write a review and grab the embed code to install the Property Research Tool functionality on your own website? We even have a widget which creates a “call to action” button (like the one below) which you can size to your requirements.

Want to learn even more?

My buy to let property investment strategy is documented and constantly updated in the Advice section of this website. To get back to the main menu >>>

 

Landlords Buy to Let Property Investment Strategy


Kent Reliance Buy to Let no minimum income and 85%! Buy to Let News, Landlord News, Latest Articles

Kent Reliance Buy to Let have withdrawn their minimum income criteria of £25,000 even for 85% Loan to Value.

However this does not mean there is no criteria as a borrower would have to demonstrate a “reasonable” income and be able to prove it with payslips or 3 years accounts if self employed ie this is not non status.

It does mean that if an application stacks up on rental income and the borrower looks like they will be able to afford their ongoing commitments then Kent Reliance will consider the mortgage rather than just declining straight away as before if income was even £1 below 25,000.

To get figures and check how much you can borrow on Kent Reliance Buy to Let 85% LTV products you can use our Mortgage Calculator and quote engine.

Andrew Ferguson who is Head of Sales and Distribution for Kent Reliance, said “we have become increasingly confident in the BTL sector and having examined the way in which our book has performed, allied to the growing evidence of the strength of the rental market, we felt that insistence on a minimum income requirement was becoming less and less relevant as a measure of affordability. We shall however keep it under review.”

85% LTV Products:

  • 4.89% 2 year discounted variable rate, 2.5% Product fee and No Early Repayment Charges. Reverts to SVR currently 6.58% (ouch!)
  • 4.99% 2 year fixed, 2.5% Product fee and 4% year 1 and 3% year 2 Early repayment penalty. Reverts to SVR currently 6.58%.

The amount you can borrow on both of the above products is Stress Tested at 125% interest cover on a Notional rate of 5%. In short that means you can borrow 192 times the monthly rental income.

Lending Criteria:

  • Minimum Property value £75,000 or £250,00 for HMOs
  • No more than 20% exposure in any one block or development
  • Maximum of four properties on one Freehold
  • Studio Flats minimum of 30 square metres
  • HMOs maximum of 8 beds
  • Student properties maximum of 6 beds
  • Limited company applications accepted, but must be a Single Purpose Vehicle.
  • Flats above commercial will be considered except where above noisy, smelly or out of hours businesses.

If you require any assistance with a Buy to Let mortgage or any type of property finance just give us a call on 01603 489118 or email: info@property118.com if we can’t get to the phone straight away and we are always happy to help or know someone who can 🙂Kent Reliance Buy to Let


Principality Buy to Let – new range starts with a 1.99% rate! Buy to Let News, Landlord News, Latest Articles

Principality Buy to Let have launched a massively improved new product range only available via brokers, but I have added them to our Buy to Let Mortgage Calculator and Sourcing system.

The Headline grabber is a 1.99% two year tracker BBR + 1.49% until 30/11/2015 with a maximum 60% Loan to Value and a 2.5% Product Fee. This also comes with a Free Valuation and Legals for a remortgage. Reverts to standard variable rate currently 4.99%.

This could be great value on a smaller remortgage, because of the percentage fee and free Val/Legals.

Other stand out products:

All including Free Valuations and Legals for a remortgage

2.99% Penalty free two year discount max 60% LTV, Product fee 1%

3.19% Two year discount max 70% LTV, product fee £999

3.49% Two year discount max 75% LTV, product fee £999

These are not high LTV products, but could be great value in the right circumstance, or you could even add the Castle Trust equity loan!

Standard Criteria for Principality:

  • Minimum Loan amount £25,000
  • Minimum Property Value £50,000
  • Minimum earned Income £20,000 or £30,000 for joint applicants
  • Maximum of 5 BTL properties with all lenders
  • Stress tested at 5.99% notional rate and 125% interest cover allows you to borrow 160.26 times the monthly rental income
  • Maximum age at end of term 69

For more information on the above products and to source a Buy to Let quote please Click Here

or if you need assistance and advice arranging a mortgage:

Email: Info@property118.com

Call: 01603 489118Principality Buy to Let


Shawbrook Bank – Definitely not for “brand new customers only” Commercial Finance, Latest Articles

Shawbrook Bank are now offering a 0.25% discount on the margin or a 0.25% discount in the arrangement fee for clients who have already been party to a completed loan with them.

This makes a very refreshing change from lenders who have traditionally only chased new customers with deals showing they realise the value in repeat business and loyal customers.

Big advantages they have over many other less specialist commercial lenders is their desire to lend with far less onerous stress testing compared to high street banks, Interest Only for commercial and BTL property and lending directly to Limited companies. I have been told many times by our own preferred brokers that they driven by common sense not bureaucracy looking for ways of saying yes to clients and not the often received “computer says no” answer from many lenders.

Shawbrook Bank lend on single investment units, portfolios, multi-units, HMO’s and student lets. They lend to both individuals and Ltd Co’s and do not limit the amount of properties that the client can own or the business activities of the limited company.

However they are not able to offer any direct customer advice or sales, and only accept business from intermediary brokers registered to their panel.

Along with their residential investment products they offer interest only mortgages up to 75% LTV and have a range of Commercial Mortgages and short term loans.

Shawbrook commercial mortgages:

Cover both commercial investment properties and owner occupier trading businesses. Their products go up to 75% LTV and they also offer interest only loans which improves business Cash flow.

Short Term Finance

Shawbrook offer market leading rates on short term finance from 0.65% pm with no exit fees for between 6 and 18 months. This is ideal for auction purchases or a speedy purchase in order to secure a discount.

Short Term Light Refurbishment Finance

Shawbrook will lend up to 70% of the purchase price at 0.73% pm for between 3 and 12 months. This is suitable for clients looking to purchase, or refinance a residential or mixed use property quickly, undertake light refurbishment and then either sell on or hold for rental.

Medium Term Refurbishment Product

They will lend up to 70% of the after works value on an interest only basis. This product is for clients that are purchasing or refinancing property with the intention of completing minor refurbishment before letting the property out.

Obviously there are many other lenders that may be suitable in terms of criteria or lower costs and it this is not meant to be an advert to only use Shawbrook, but it is great to see a lender valuing its existing customers.

For assistance with any property finance requirements please, call us on 01603 489118 or email info@property118.com

If you would like to add your own requirements and search for the most popular available Buy to Let products please click hereShawbrook Bank


Tax Treatment of Equity Loans for Buy to Let Landlords Advice, Buy to Let News, Commercial Finance, Financial Advice, Landlord News, Latest Articles, Legal, Mortgage News, Property Investment Strategies, Tax and Accountancy, Tax News, UK Property Forum for Buy to Let Landlords

I have been posting on numerous forums about the introduction of equity loans into the UK buy to let mortgage market, a common question is the tax treatment.

Equity loans do not attract interest in the normal way, there are no regular monthly payments. One UK lender, funded by USA equity house JC Flower & Co. (a leading financial services investment company with funds in excess of £5billion) has entered the UK market and others may follow. Their return on investment is earned when the loan term expires or or sale or refinance of the property, whichever is sooner. Their return is capital plus a share in capital appreciation equal to double their investment. For example, if they provide top up finance of 10% of a property value their return with be 20% of the increased capital value plus their investment when the funding is redeemed.

As you may know, I was previously a former commercial finance broker. When I was practising I was renowned for digging into complex funding, tax and legal structures to explore opportunities and threats which others may never have considered.

Note to all – I no longer provide advice and this post must not be treated as advice.

The tax treatment of the redemption of BTL equity loans will be very interesting.

Let’s use this example. Equity loans can sit over and above traditional interest bearing mortgages but for the sake of simplicity I have based the following example on equity funding only.

Property value at outset £100,000
Equity loan at outset £20,000

Property value at sale £200,000
Capital gain £100,000 (or is it and if so how is it shared? – see below)
Equity loan capital repaid £20,000
Profit on Equity loan to lender £40,000

Now does the £40,000 profit on the equity loan to the lender reduce the owners capital gain to £60,000 or is the owners gain still treated as £100,000?

The lender operating the first of these schemes has already stated they will bill their return as interest at the point of loan redemption. However, that’s not to say HMRC will see it that way, only time will tell. Therefore, my suggestion to all landlords considering this type of finance is to plan for the worst and hope for the best in terms of tax treatment. As has been proven many times, the law says you can call something pretty much whatever you like but case law or legislation will determine what it really is. Case in point, advance rent or deposit? – see Johnson vs Old

So will profits made by equity lenders need to be used to offset rental profits? If so there could be a substantial paper loss created in the year of redemption. Unused losses may be rolled forward, assuming losses are made, but such losses are only offsettable against future rental profits. No problem, in fact potentially very advantageous, IF you continue to make rental profits going forward. However, if this was your only property you may be stuffed by having to pay CGT on the full £100,000 of gain and not being able to utilise the carry forward losses. Note that rental losses can not be used to reduce other taxable income.

I can’t see HMRC allowing landlords to choose how they apply the lenders return to suit their individual circumstances, i.e. as either interest or a share of capital gain,  but we can live in hope, not that that’s a good strategy of course! If HMRC do allow a choice to be made that would be utopia from a tax planners perspective 🙂

What I would suggest to all considering equity loans is that they should plan for the worst case tax scenario and hope for the best case tax scenario. In other words, make decisions based on the worst case tax scenario and if that works then fine. Obviously there are many other aspects of the deal to consider too which is why I am an advocate of taking professional advice as opposed to taking a short sighted approach and simply jumping into deals unadvised just to save initial fees.

If you are a portfolio landlord who makes good rental profits then treating the lenders return as interest could be extremely tax advantageous if the tax regime remains as it is today. This is because income tax rates are greater than capital gains tax rates for higher rate tax payers.

Therefore, for landlords who will continue to make rental profits, post redemption of their equity loans, this is particularly attractive in my opinion. At worst, if HMRC decide to treat the lenders returns as capital gains, landlords will pay a lower CGT bill and not be able to offset interest. For a landlords with no ongoing rental profits post redemption of an equity loan, having the lenders return treated an interest charge is highly unlikely to be attractive whereas having the returns treated as capital gains will be far better for them.

If, of course, your equity loan is secured against your private home then no CGT is payable on sale anyway.

Tax Treatment of Equity Loans for Buy to Let Landlords

Tax is not the only consideration.

I have listed 11 good reasons for considering the product and 9 downsides in my main post about equity loans. That’s not to say that everybody should think equity loans are the best thing since sliced bread just because my list of pro’s and cons is 11 vs 9, it doesn’t work that way. The reasons for NOT doing something can be very different to reasons FOR doing something, they are not necessarily like for like considerations. For example, I also prefer a strategy of high gearing combined with high liquidity over a low gearing strategy because that’s what suits me and my attitude to risk. It does not mean that people who prefer a different strategy are either wrong or right, it just proves we are all different, hence we have other preferences such as careers, holidays, cars, films, food and where we live.

For further information and discussion about equity loans please CLICK HERE.


Equity finance for buy to let landlords Advice, Buy to Let News, Commercial Finance, Landlord News, Latest Articles, Mortgage News, Property Investment News, Property Investment Strategies

Equity Finance for buy to let landlords

In this article I will explain the fundamental difference between equity finance for buy to let landlords and traditional buy to let mortgages facilities. Equity finance for buy to let landlords

Both are mortgages which are secured by a legal charge over a property.

Until recently, only traditional buy to let mortgage finance where interest or interest and capital are repaid monthly have been available. This type of finance is usually secured by a first legal charge over the property, also known as a mortgage.

Equity finance has tended only to be available to blue chip companies but that’s all changing. It’s now possible for landlords to secure equity finance on their buy to let property portfolio or even their own home and without even having to remortgage.

Equity finance doesn’t attract interest at all. In fact, there are no monthly payments whatsoever. Instead, the lender takes a stake in the capital appreciation of the property, typically at the end of the loan term or when the property is sold or refinanced. Additionally, equity finance can be secured by either a first or a second legal charge, hence it can be used as top up finance.

For further details please CLICK HERE


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