Tag Archives: buy to let mortgage

Record levels of Bridging Finance used by Landlords Buy to Let News, Commercial Finance, Latest Articles

In the last year Landlords borrowed £640 million on Bridging finance for the purposes of Buy to Let.

The use of Bridging Finance by Landlords has increased significantly in the last few months with a record total for July and August alone coming to £194 million, which is an estimated 36% of all bridging loans drawn down during the same period.

Figures supplied by the West One Bridging Index show that over the twelve months to August, industry gross bridging lending was £1.79bn. Compared to the previous twelve months, to August 2012, this represents annual growth of 26%.

Duncan Kreeger reporting on the index figures said “Landlords don’t just need mortgages. To expand portfolios, landlords are increasingly converting properties from other uses or from a dilapidated state.”

“The trouble is that standard mortgages were never really set up for that sort of loan, and the financial crisis has made lending criteria even stricter. For example, it’s practically impossible to get a high street mortgage on an ex-office – or a flat with no bathroom.

“Working alongside mainstream finance, short-term, secured loans increasingly bridge that gap. There are more and more landlords who want to grow their portfolios in more intelligent ways. Most vitally, this can actually expand the stock of available properties.”

If you need help with…bridging dinance

Buy to Let mortgages : info@property118.com

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…. or guidance regarding property finance you can email us on : info@property118.com

Call Property118 on: 01603 4891181


Development finance using Equity instead of Liquid Cash Commercial Finance, Latest Articles

I have an example of how the commercial market is changing. Some lenders are now taking a risked based view of using second charges over equity as security for development finance rather than only relying on pure cash being put up as collateral by investors.

Example of a recently completed case, as follows:

A builder/developer was looking to buy a property to renovate for a long term investment and once complete take out a Buy to Let mortgage based on its new and improved value (and if possible have additional funds returned too).

He was very limited in the cash deposit he had, as all his money is tied up in other properties which he lets out, however he had a good level of equity in his main residence, which has a value of £600,000 and an outstanding mortgage with the Halifax for £300,000

He found a property which needed heavy renovation including a full new and extended kitchen, and also a new bathroom. The purchase price was £150,000 in its current state and the cost of renovation was £40,000 (as he would be able to do it himself). Therefore, the total borrowing required was £190,000

He ideally wanted to borrow 100% of the purchase price and 100% of the renovation costs using both properties as security, including using the equity in his home as additional security.

Once renovated he required a quick solution in changing the bridging loan into a Buy to Let mortgage

He was able to borrow 75% of the new purchase – which gave him £112.5k on a bridging rate of 1.15% for 3 months. A very keen rate for refurbishment deals.

The short fall of £37.5k towards the purchase and the £40k needed for the renovation works was raised by adding in the additional security via a 2nd charge on the client’s main residence by the same Bridging company.

He was offered a 2nd charge bridge on his residential property up to 70% LTV (although he did not require as much as that) including his existing main residence mortgage at a cost of 1.4% per month. This meant he could raise up to up to a max £120k from this property, more than enough to raise the required 100% of the purchase together with 100% of the renovation costs.

The valuer was booked to attend the property within 72 hours. In the meantime the shopping list of requirements was quickly collated and submitted.

Working closely with a solicitor that understood the speed required for a bridging loan, the deal was completed within a few weeks enabling him to ‘do up’ his new property, increasing the value to £300k.

3 months later he was then able to change the bridging loan product to the lenders the same lenders Buy to Let product at 4.10%, releasing 75% of its new improved (and surveyor agreed) value. This released £225,000 back to the client, enough to clear the bridging loans and put some money back into his cash flow.

Summary of Deal:

  • Liquid Cash available £0
  • Purchase Price £150,000
  • Costs £40,000
  • Gross Development Value £300,000
  • First Charge Bridge £112,000 at 75% LTV
  • Second Charge Bridge on Main residence £77,500 at 70% LTV
  • BTL on completion of works £225,000
  • Liquid cash released £35,500

The set up costs not including interest were:

  • 1st Charge on property of £150k = valuation £330
  • 2nd Charge on residential property of £600k = valuation £540
  • Legal fees = £780
  • Total = £1,650

Buy to Let 3 months later:

  • Property now worth £300k = valuation £360
  • Legal fees = £540
  • Total = £900

Could this be of interest to you?

If so, check our my member profile, linked from my author profile at the top of this article.liquid cash


Negative equity – forced to repay mortgage Latest Articles, UK Property Forum for Buy to Let Landlords

I have a buy to let mortgage with Mortgage Express. This mortgage finishes in April 2015. The value at present of the property is around £50000. I paid £126,000 for it 6 years ago with a mortgage of £113,500. There is now negative equity in the property in the region of £76,000.

I have paid the interest on the mortgage consistently and the property has been let at a fair rent allowing the mortgage payments to be met.

I have asked Mortgage Express for an extension of the term to allow equity to build in the apartment so as to give me a chance to sell it and redeem the mortgage. Negative equity - forced to repay mortgage

I have asked Mortgage Express to allow me to overpay and they have agreed, however I don’t want to overpay to find that I am made bankrupt due to their unwillingness to extend the mortgage in April 2015. There will be a shortfall of £45000 even if I over pay £1000 a month.

I earn a good wage and can afford to overpay by over a £1000 per month.

I have also written to the Prime Minister who has given the treasury my letter who in turn have responded. They say tackle the case with the Financial Ombudsman. My past dealings with them seem to be that they are weak to say the least.

It seems unfair that due to no fault of my own, indeed the financial crisis of the country being the cause and the disastrous dealings of the banks being responsible, I have to be responsible and accountable instead of the perpetrators.

Any suggestions?

Regards

David


Tenants Charter – Mr Pickles, have you gone completely mad? Buy to Let News, Landlord News, Latest Articles, Legal, Property Investment News, Property Market News, Property News, Tenant Eviction, UK Property Forum for Buy to Let Landlords

Tenants Charter

Open Letter to Mr Eric Pickles – Communities Secretary – re Tenants Charter

Dear Mr Pickles

Have you gone completely mad?

I am reading in The Times Newspaper today that you are to announce a “Tenants Charter” which will allow tenants to demand two to five year tenancy agreements.

Do you realise that most buy to let mortgage borrowers would be in default of their mortgage contracts if they were to offer tenancy agreements with fixed terms longer than 6 or 12 months?

Do you realise that most modern leases (e.g leasehold flats) contain conditions on subletting not exceeding 12 months in term?

There is a very good reason why mortgage lenders have these conditions in their mortgages. It is because it is so difficult to obtain possession when a tenant reneges on a contract. Bad payers are regularly getting away with up to 5 months of rent free living. Theoretically a landlord can apply to obtain possession by serving two weeks notice once a tenant is two or months in arrears on rent. However, after that 10 weeks has expired it can take several months to get a Court date. Even when a possession order has been granted it then takes several more weeks before bailiffs can be appointed to enforce the order. If you want landlords and mortgage lenders to provide greater security of tenure to tenants then you are going to have to sort out the possession rules for landlords first.

Section 21 of the housing act transformed the UK Private Rented Sector which was in rapid decline until the 1988 act was introduced. Forcing landlords to offer long term tenancy agreements will force the PRS back into the dark ages and reduce incentive for further investment into the sector.

Does Government not recognise the need for a healthy PRS?

Does government not realise that a huge sector of the working population rely on the housing flexibility the PRS provides in terms of job mobility?

Do you have any idea of how your speech today could destabilise the Private Rented Sector?

I totally understand that good tenants, particularly young families with children of school age, need a fair deal and it cuts both ways in that most landlords want good tenants to stay long term. It makes economic sense for landlords to have quality long term tenants,

So why have you not even considered promoting the Deed of Assurance?

Perhaps you are unaware of the effectiveness and simplicity?

A Deed of Assurance is a document in which a landlord promises to pay an agreed level of compensation to a tenant if possession is obtained within a given time period. 

A Deed of Assurance is a relatively simple legal agreement which sits alongside an Assured Shorthold Tenancy Agreement “AST”. It is a separate agreement between landlord and tenant which does not affect the landlords rights to serve notice or to obtain possession, therefore it does not affect the rights of a mortgage lender either. However, it does offer tenants peace of mind.

From a tenants point of view, a Deed of Assurance provides far more flexibility than a long term tenancy because they are only tied in for 6 months and can then move on if they need to. What a Deed of Assurance offers in addition to an AST is peace of mind.

The compensation amount offered by the landlord is negotiable but obviously the idea is to agree something which is meaningful to both parties. For example, I offer to pay anything between £1,000 and £5,000 compensation if I obtain possession within the agreed period, providing the tenancy conditions have been observed impeccably by the tenant of course. If tenants fail to pay rent on time or breaches other contractual terms within the tenancy agreement their right to claim compensation for being evicted during the Deed of Assurance is forfeited. I have been offering a Deed of Assurance to my tenants for a few years now and I am delighted to report that my relationships with new tenants have never been better.

I do not expect a reply from you Mr Pickles but I do hope you will consider the implications of acting on the advice of the people who have been influencing you up to this point.

Yours sincerely

 

Mark Alexander


Buy to Let Mortgages to remain legal announces EU Latest Articles, NLA - National Landlords Association, UK Property Forum for Buy to Let Landlords

The Mortgage Directive, officially known as the ‘Credit Agreements Related to Residential Property Directive’ (CARRP) attempted to create a single regulatory framework which would govern all mortgages within the European Union. The EU lobbied hard for this directive so that EU citizens would understand the regularity regimes when purchasing properties in different member states.

However, in constructing the Directive, the EU Commission didn’t take into account the nuances of unusual mortgage products such as buy-to-let that exist in some member states. Therefore, when the Directive was sent to the European Parliament, the text would have made buy-to-let mortgages illegal. This would have been catastrophic for the UK’s private-rented sector.

Had the Directive passed in its original form, it would have been disastrous for landlords operating in the UK’s private-rented sector and the economy as a whole. Buy to Let Mortgages to remain legal announces EU

The final text is now going through the trialogue process which involves all 27 Heads of State and the European Parliament who will analyse the new text before voting on the new Directive to sign it off.

David Cox, Senior Policy Officer for the NLA says:

“The NLA is very pleased with the EU’s decision to exclude buy-to-let mortgages from the Directive. We have lobbied hard to ensure the UK’s main facility for investing in property to rent can remain in place.

“The private-rented sector is currently the only growing part of the UK’s housing market and I am certain that a mortgage Directive including buy-to-let mortgages would have prohibited this.

“This really is a success for the NLA and its European colleagues.”


How to get 6 BTL mortgages with BM Solutions Buy to Let News, Latest Articles, Mortgage News, Property Investment News

So many buy to let borrowers get frustrated because BM Solutions will only allow them to have 3 buy to let mortgages. However, now they have removed their minimum income requirements, this criteria is very easy to overcome for many borrowers.

The answer is to own the properties in your individual names. That way a couple can have three mortgages with BM Solutions each. Hey presto, that’s six mortgages with BM Solutions.

The are also many other advantages of owning the properties in individual as opposed to joint names. For details of this see my Landlord Tax Strategy.

If you would like to discuss further borrowing strategies why not have a chat with my business Partner, Neil Patterson. His contact details are npatterson@property118.com or you can call him on 01603 489 118BM solutions logo


Buying a BTL with a residential mortgage Latest Articles, The GOOD Landlords Campaign

I am 24 years old and have owned my own home for a little over a year now. This house is on a repayment mortgage.

I have the opportunity to purchase a second house from my father in law which already has a tenant in.

My plan was to borrow approx 30k on my current mortgage for ‘”home improvements” and then use this as the deposit on this second home.

After phoning many banks they want a 70% LTV. The house I wish to buy is approx 200k.

This therefore means I can’t get a buy to let mortgage

Am I breaking the law by trying to obtain an ordinary repayment mortgage and then letting this out to the existing tenant as I see this as my only option ?

My plan long term is to rent the house on a repayment mortgage and then the rent would cover my monthly cost. if it fell short I would simply top it up to cover my fees.

I would have the correct buy to let insurance policies but would the mortgage lender be able to find out I am renting the property out?

Any help would be greatly appreciated with someone who has been in this position and now overcome it!

Regards

Dan Buying a BTL with a residential mortgage


Aldermore offer Buy to Let for customers with light adverse credit Buy to Let News, Latest Articles

Since the credit crunch it has been extremely difficult for anyone without a perfect credit history to obtain a Buy to Let mortgage. Mainstream lenders have not been interested in entertaining any mortgage arrears, CCJs or defaults until now.

Aldermore have changed their Buy to Let criteria  allowing a mortgage to be considered for customers who have had:

  • 1 or 2 missed mortgage payments over 12 months
  • CCJs and Defaults registered over 3 years ago
  • Missed unsecured credit payments such as credit cards, mobile phone, loans etc

In recent years most options open to Buy to Let customers with any adverse credit would have cost 8-10% and even up to 15% for more serious cases.

This is obviously a very clever attempt to capture market share in a niche area, but really does help a lot of investors who have had a blip and are still a good risk

The Aldermore Product range starts from:

  • 3.98% for a 2 year fixed fee 2.5% at max 75% LTV
  • up to 4.98% with £1,999 fees for their 80% LTV products.

Aldermore Criteria includes:

  • No minimum income for experienced Landlords or £25,000 min for First time Landlords
  • Min Value of a property £75,000
  • No DSS tenants
  • Max 5 properties with Aldermore

You can get a full quote on our Buy to Let mortgage sourcing Calculator if you wish (CLICK HERE)

Or if you need any help with a Buy to Let application

Email: info@property118.com

Tel: 01603 489118Aldermore


Buy to Let mortgage products and criteria – market update Buy to Let News, Latest Articles

After updating and writing the article on our Buy to Let mortgage sourcing system and calculator I thought I would give readers an update of what is still available and popular in the market.

You can find all these products on our system and get a quote (CLICK HERE), but many people ask me what has changed since they last took out a Buy to Let mortgage normally pre-credit crunch.

Loan to Value (LTV):

The industry standard maximum LTV is now 75% as opposed to 85% up to 2008.

You will find the cheapest rate products and and fees around the 60 – 65% LTV region with sub 3% short term rates or products with no arrangement fees and fees assisted such as Valuation and Legal cost.        Eg. 2.49% 2 year fixed with 2.5% fee

80% products will tend to have higher rates around the 5% point, with increased arrangement fees and stress testing to cover the perceived increase in risk compared to lower LTV products. A popular market provider of 80% LTV products is The Mortgage Works with rates starting from 4.14% 2 year fixed with a 2.5% arrangement fee to 5.29% with a £995 fee.

85% is still available with Kent Reliance but at a cost to rates fees and criteria – 4.99% 2 year fixed product fee 2.5% and reversion rate after initial term 6.58% SVR (ouch). Minimum property value £75,000 and £25,000 applicant earned income with proof.

Stress Testing:

How much you can borrow based on the rental income aka Stress Testing has actually changed very little over the years since 2008.  With reduced Loan to Values, lower property prices and increased rental income the amount you can borrow based on rent is not normally an issue unless the property is particularly poor yielding or the Loan to Value is high with a high stress testing.

The average stress testing figure is based around 5% notional rate and covering the interest by 125%. This in plain English equates to being able to borrow 192 times the monthly rental income. However at lower LTVs and interest rates this could be as much as 300 times or as little as 154 times for 80% products.

Criteria:

You can still borrow on Buy to Let mortgages for non standard properties such as HMO’s, new build flats, Multi-Unit, flats above none smelly or noisy commercial, however you have to be prepared depending on lender and the property for a lower LTV, higher interest rate and higher stress testing to cover the lenders perceived risk again.

Borrowing on Buy to Let mortgages in the name of a Limted company is still possible with Lenders such as Keystone, but it is preferred to be a Single purpose Vehicle rather than a Trading Ltd company and the options are vastly reduced. Therefore the tax advantages of purchasing using a Limited company can often be negated by difficulty and cost in finding finance.

Example Products:

Some other products not mentioned that I noted when updating the system as potentially stand out were:

3.99% 2 year Tracker Libor Tracker No Fee and Free Valuation 75% LTV

4.98% 5 year fixed £1,999 fee 80% LTV

3.49% Flexx variable mortgage for the term Fees £999 with no early repayment charge and free remortgage service and Valuation 65% LTV

4.74% Standard variable for the term No fees No early redemption penalty free valuation 65% LTV

2.99% 2 year fixed 2.5% fee 75% LTV

To Search for all the products on our own in house Buy to Let mortgage sourcing system and calculator please CLICK HERE

For any assistance you may need with a Buy to Let mortgage please email info@property118.com

Tel: 01603 489118Buy to Let Mortgage system

 


Our own Buy to Let Mortgage sourcing system and calculator Buy to Let News, Latest Articles

I have just finished updating all the products on our own in house Buy to Let Mortgage sourcing system and calculator. This takes quite a bit of time, but it is definitely worth it and I wanted share with readers what it can do as it is our own in house design specifically based around the needs of property investors.Buy to Let Mortgage sourcing system and calculator

The first Key inputs are:

  • The Value of the property or Purchase Price
  • The amount you want to borrow
  • The Rental income pcm

This will then work out if the rental income is enough for every lender and product on the system to agree a Buy to Let mortgage. This is called Stress Testing and is commonly worked out (but not always) by the rent covering the interest only mortgage payment by 125%.

It will also consider the amount you want to borrow against the value of the property as a percentage. This is called Loan to Value and some products or Lenders will vary from 50% LTV to 65%, 75%, some up to 80% and even one still at 85%

Another factor from these figures are the Lenders’ maximum and minimum loan amounts (most lenders will not lend below £25,000) and also minimum property values ( most lenders will not lend on a property below £40,000 and some higher).

Other key inputs are:

Income – many lenders have a minimum income level for applicants although this does not affect the loan amount as it is based on rent.

Preferred rate type Fixed or Variable – Do you want it to search for products where the interest rate will remain the same for the term of the product or are you happy to take the risk of a rate that may change up or down. The system will then only show results for the type you choose (although you can easily change your mind).

You will then get a list of results (see below) which will show:

  • A list of the available products based on your criteria
  • Interest Rate
  • Product term
  • reversion rates
  • Fees
  • Early redemption penalties
  • How the Stress testing is worked out ie the amount you can borrow for every £1 of rent pcm
  • If you could borrow more how much you can borrow as a maximum and get a quote based on that figure

Buy to Let mortgage search results

Then just click on the Get quote Link for the loan requested or the maximum possible loan.

You will then get an full illustration of the product you selected along with a financial summary showing:

  • The interest only Buy to Let mortgage costs per month
  • A table showing the Capital and Interest Buy to Let mortgage costs per month
  • The minimum amount the rental income would need to be for the loan requested
  • Yield (i.e. annual rental income expressed as a percentage of property value)
  • Rental Return on Equity Invested (net of mortgage costs)
  • The LTV (i.e. the loan expressed as a percentage of valuation) is

And much more see below:

Buy to Let mortgage Illustration

You can find The Buy to Let Mortgage sourcing system and calculator under our Finance tab see below or CLICK HERE to start your search

Buy to Let mortgage tab

 

 


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