Tag Archives: further advance

Castle Trust Equity Loan Finance Buy to Let News, Landlord News, Latest Articles, Mortgage News, Property Investment Strategies, Property News

Castle Trust Equity Loan Finance has the potential to be the biggest game changer in the UK mortgage market since Buy to Let came about in 1996.

Not only does the Castle Trust equity loan finance product allow you to borrow more without having to refinance, there are also no monthly payments, EVER!

Instead of paying interest and capital repayments as you would on a normal mortgage or second mortgage, Castle Trust take a share in the capital appreciation of your property when it is sold. If your property doesn’t go up in value by the time you sell it then all you owe Castle Trust is what you borrowed, they make no return. If your property does go up in value when you sell it then Castle Trust take a share in the profits. Castle Trust

As you might imagine, the Castle Trust Equity Loan Finance offer has captured the imagination and creativity of landlords because this mortgage product can enable them to raise money to buy more properties without affecting their cashflow. The art of borrowing is to make your borrowed money work harder than it costs – this mortgage product certainly has potential for landlords to use it that way.

Industry reaction to the Castle trust products

I have already spoken to a few buy to let mortgage lenders about the Castle Trust offer and feelings are mixed. Some don’t like it because they feel it could affect their risk profiles, however, so far these lenders haven’t been able to give me a logical reason as to why they feel this way. On the other hand we have lenders which are considering designing new BTL products at 65% LTV with a view to dovetailing them into the Castle Trust product. They are considering this on the basis of there risk being lower than normal at 65% LTV and overall serviceability of debt also being better due to there being  no monthly interest payable on the top-up 20% of a loan provided by Castle Trust which takes overall gearing up to 85%.

Castle Trust have certainly got people talking and thinking!

Landlords are acting on this too – who knows how long it will be available for? I first wrote about the Castle Trust deal for landlords and our hand picked panel of advisers just a couple of weeks ago. Since then we’ve have an incredible response and referrals to our recommended advisers have already been converted at an incredible 90% plus conversion rate into decisions in principle from Castle Trust. Yes, they are a slick operation to deal with too, it’s possible to get a Decision in Principle within 24 hours of contacting one or our recommended broker panel members.

We have quite a debate going on amongst landlords and professional advisers about the pro’s and cons of the Castle Trust equity loan finance products elsewhere on this website. Therefore, I will not be adding a comments section to this particular post. However, do pop over to the thriving discussion over on this thread and  read what your peers have to say about the product. Feel free to ask questions yourself too 🙂


BTL Second Charge Mortgages / No Monthly Payments Advice, Buy to Let News, Commercial Finance Broker Blog, Financial Advice, Landlord News, Latest Articles, Mortgage News, Property Investment News, Property Investment Strategies, Property News, UK Property Forum for Buy to Let Landlords

No this is NOT a wind up, it’s 100% genuine and is important that you know how it works so that at the very least you can make an informed decision about new financing choices which until now have been unavailable to buy to let landlords.

It really is a fantastic way to improve cashflow and rental profits or increase gearing without the need to remortgage.

A very credible mortgage lender (Castle Trust) is offering second charge buy to let mortgages with no interest charges and no monthly payments based on 20% of value subject to both the first and second mortgage combined not exceeding 85% LTV on BTL deals and 80% on your own home.

You can use the money in whatever way you wish, for example:-

  1. You can use it to pay down existing mortgages
  2. You can save the money for a rainy day
  3. You can use the money to buy more property
  4. In fact, you can blow it all at the local casino if your daft enough too!

So what’s the catch?

With no monthly payments or monthly interest charged, the lender must get paid somehow. This product works with a profit share basis, in that you borrow 20% of the value of your property the lender will take 40% of any increase in value – on sale or refinance.

You will also need to obtain permission from your existing mortgage lender for a second charge to be added.

Given that your equity in the property may represent as little as 15% of the value of the property and you will receive 60% of the capital appreciation you don’t need to be Einstein to work out that it’s better to use their money than yours, especially if you use the extra money raised to purchase more properties. Remember, you will not be making any payment or incurring any interest whatsoever until you sell or refinance.

Imagine if somebody put this deal to you …. I want to buy a property, you put 20% of the money and I will put in 15% and borrow the remaining 65%. I take all the rental profit/losses and when we eventually sell the property I will get 60% of the capital appreciation and you will get 40%. Oh and by the way, I will decide when we sell, OK? You would probably say no wouldn’t you? Well if you put that deal to Castle Trust, chances are they will say yes providing you have a good credit rating. It really is that good.

Basic criteria

The loan term can be up to 30 years if the equity loan is secured against your own home, 10 years if it’s a rental property.

Your total LTV must not exceed 85% on a rental property, 80% if the loan is secured on your own home..

There are no limits on the number of properties the lender will consider lending on per borrower and their maximum loan exposure to any one client is £1 million.

The minimum advance is £10,000.

For rental properties there is no requirement to have a first mortgage.

You must be able to prove that you have been a landlord for at least six months to qualify and you also need a decent credit score.

Pros and cons?

I can see several reasons why this will be attractive to landlords and I will be using this product myself for the following reasons …

  1. Deals may not stack up on rent to ordinarily qualify for an 85% LTV mortgage but may do so on this basis
  2. It’s a relatively easy way to raise capital against the security of your existing rental portfolio or your own home
  3. Improved cashflow when compared to a conventional mortgage for a higher amount
  4. Raise money without paying off an amazing tracker or fixed rate deal arranged pre-credit crunch
  5. Avoid potentially extortionate fees associated with refinancing
  6. Increase borrowing without affecting cashflow
  7. Use of other peoples money to increase leverage and returns on capital invested
  8. Castle Trust do not legal or valuation fees to arrange finance on your own home and their arrangement fees are only 1% of the advance. Valuations on rental properties cost £195+ VAT and conveyancing costs £216. This means that total fees are likely to be significantly less than arranging a conventional remortgage.
  9. Some landlords will wish to borrow 20% LTV via Castle Trust to partially redeem their mortgage with another lender and thus benefit from improved cashflow.
  10. Some landlords will wish to utilise this product to borrow more money
  11. Some landlords will wish to mix and match, i.e. reduce existing interest bearing debt and increase overall gearing to 85% LTV

Downsides

  1. Your risk is higher than that of Castle Trust because they get paid back before you do on the basis they have second charge over the property. Therefore, if the property decreases in value then you carry the majority of the risk. However, unless you’ve come to the end of the loan term it’s up to you to decide when you sell, they have no say in it.
  2. Future remortgaging may prove more difficult
  3. No new build property, i.e. properties built in the last two years
  4. The product is only available on properties located in England and Wales (not Scotland or Northern Ireland)
  5. 40% reduction in any future capital appreciation but you do need to consider that you may well be able to use the money to make a better return elsewhere
  6. The improved cashflow, in comparison to an higher traditional mortgage, will increase taxable income. However, many will see that it’s better to pay tax on profit than to have no profit at all
  7. Early repayment charge of 5% in year one
  8. If you wish to repay the loan without selling the property then you are committed to proving Castle Trust a return equal to the greater of 2% per year for the period which the loan has run or 40% of the rise in property price
  9. You will need to contact your existing mortgage lender before progressing matters to establish whether they will allow a second charge to be taken

We have no idea how long this funding will be available for so if this is of interest we recommend you to get in quickly. BTL Further Advances No Monthly Payments

We will be arranging introductions to brokers on a panel of specialist advisers which I have personally hand picked. The role of the adviser will be to review your portfolio and provide you with bespoke advice and quotations based upon your personal circumstances.

We are also considering the demand for free of charge introductions to a non-advised mortgage packager service. However, unless you consider yourself to be a sophisticated investor and in need of no advice and associated protection we strongly recommend you to obtain professional advice from our carefully selected panel of advisers.

Obviously we want to make some money out of this too so we are charging a fee of for introductions to our panel of professional advisers. By charging for the introductions we, and the advisers we are referring to, recognise that only serious enquirers will progress matters. This is a good way to ensure that our advisers are not bogged down answering questions from time wasters and also provides a very a good reason for our recommended advisers to prioritise our referrals.

Our fee for arranging an introduction to a professional adviser, who will visit you to provide face to face advice if that is required, is £200, payable to Innovative Landlord Solutions LLP (the legal owner of Property118.com) either by credit/debit card or via PayPal. You will then be contacted within 7 days.

Professional Adviser Introduction Request Form

  • Price: £ 200.00
    Fees are non-refundable


Buy to Let Mortgage products and market update – essential reading Buy to Let News, Landlord News, Latest Articles

Having just updated the Buy to Let mortgage products on our own in house Buy to Let Mortgage sourcing system and calculator I thought I would give you a summary of what’s Hot or Not in the current market.

Virgin Money have been added to the system because of their helpful attitude and criteria which includes:

  • Day one remortgages – So no need to wait 6 months to remortgage for cash purchases, refurbs, Auction purchases etc
  • First Time Buyers
  • Regulated Buy to Let

However Maximum LTV is 70%. Stand out different product is a 5 year fixed at 4.09% with £750 Cash Back and 2.5% product fee (better for smaller loan sizes where looking to fix costs long term is important.

The Mortgage Works (TMW) always been and old favorite of mine going back to 2003 have a selection of 80% LTV products and no income requirement for existing landlords.

Interestingly they have no longer term products currently above an initial 2 year deal. This will either be because they have purchased no long term funds or are uncertain of market direction at the moment. Example products range from:

  • 2.49% two year fixed with 2.5% arrangement fee at 60% LTV (really only a headline grabber) to
  • 4.14% 2 year fixed 2.5% fee at 80% LTV (one of the lower interest rate high LTV products)

BM Solutions were the old industry go to lender until introducing a maximum exposure of 3 mortgages, but still have one of the most comprehensive range of products up to 75% LTV.  They are also often helpful for flats above or adjacent to commercial premises.

  • 3.19% 2 year tracker £1295 fee 60% LTV
  • 3.89% 2 year tracker 0.5% fee 75% LTV
  • 4.34% 3 year fixed 1% fee 75% LTV
  • 4.99% 5 year fixed 1.25% fee 75% LTV

BM Solutions have NO customer service staff so any mortgages or further advances even must be done by a broker.

Kent Reliance are really mostly famous for being THE 85% LTV lender.

However minimum property value £75,000, proof of £25,000 income required stress tested at 192 times monthly rental income.

  • 4.99% 2 year fixed 2.5% fee 85% LTV reversion rate 6.58%
  • 4.89% 2 year discount 2.5% fee 85% LTV reversion rate 6.58%

Aldermore have a good range of 80% LTV products at 4.98% including 2, 3 and 5 year fixed and a varibale rate for the term. They will do day 1 remortgages for properties bought with a bridging loan on a like for like basis and inherited properties.

They will also consider customer with light adverse credit which very few lenders will allow including:

  • 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 et

Principality have a penalty free no tie in 2 year discount product at 3.39% with only a 1% + £99 fee at 60% LTV.

Also interestingly they will consider Holiday Homes on their BTL range!

Godiva owned by the Coventry building society are the “Does what it says on the tin lender” I liken them to the Yorkshire tea, or a sliced white loaf of a the buy to let product market. Nothing spectacular just a good solid no frills value for money products.

  • 3.49% variable penalty free for the term of the loan, £999 fee max 65% LTV (very good value with flexibility)
  • 3.79% 2 year fixed, £500 fee max 65% LTV
  • 4.74% Standard variable penalty free no fee max 65% LTV

Cost and product wise the market has been reasonably stable with small improvements adding up each month giving a healthier range of options available especially in niche areas such as:

Terms beyond retirement age, Bridge to Let, Remortgages inside 6 months, Ltd company applications, Higher LTV, Lower fees, Light adverse, Holiday let and more.

All of the above products, lenders and many more can be found by using our Buy to Let calculator and quote engine Please Click Here

If you need any assistance with a Buy to Let mortgage you can also:

Email: info@property118.com or

Telephone: 01603 489 1182013


Second charge BuytoLet loans via Shawbrook Buy to Let News, Commercial Finance, Landlord News, Latest Articles, Property News

shawbrookI 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.

To search for a Buy to Let mortgage and Calculate how much you can borrow please Click Here

If you would like any advice from our recommended mortgage broker please do not hesitate to contact me on 01603 489118 or info@property118.com

 


Landlords Tax Planning Strategy Landlord News, Latest Articles, Property Investment Strategies, Property News, Tax & Accountancy, Tax and Accountancy, Tax News

Landlords Tax Planning Strategy“Milking the Buy-to-Let” is a Landlords Tax Planning Strategy which is very much under utilised. The strategy applies only to married couples and Civil Partnerships and is used to offset mortgage interest against rental income, regardless of whether the amount borrowed exceeds the original purchase price and also regardless of how the proceeds of the finance are used. Continue reading Landlords Tax Planning Strategy


Bridging finance surge in demand Commercial Finance, Landlord News, Latest Articles, Property Auctions, Property Development, Property Investment Strategies, Property News

Brooklands Commercial Finance have witnessed a significant upsurge in demand from referred Property118 readers for bridging finance as traditional secured lending markets become less accessible.

No longer seen as a lending product of last resort, bridging finance has become a mainstream vehicle for a wide range of purposes. Bridging finance can be arranged quickly compared to high street commercial loans with funds being made available often within days rather than weeks. A short-term lending facility can be used to secure an important purchase or unlock a value enhancing project to existing securities and more. Continue reading Bridging finance surge in demand


Buy to let property portfolio building – Readers Advice Request Landlord News, Latest Articles, Property Investment News, Property Investment Strategies, Property News, Question of the Week

I received the email below from one of my readers yesterday morning requesting advice on buy to let property portfolio building. I’m happy to share my thoughts and will do so in due course in the comment section below this article. However, I thought my reader may appreciate a variety of opinions so I emailed him back and offered to publish his email as an article so that other people could also comment. He agreed but wanted to remain anonymous which is obviously fair enough. Continue reading Buy to let property portfolio building – Readers Advice Request


Get into High Gear with Gearing Guest Columns, Property Investment Strategies

Using Finance to Increase your Returns

After recently attending local property networking events it still amazes me that investors think it’s a good idea to buy properties for cash. Firstly, the financial returns are less when a property is purchased for cash. Secondly, it means a large amount of cash is tied up for six months as no remortgaging can take place until a period of six months has elapsed. This means if a bargain property opportunity comes along within that six month period you will miss out, unless you have more cash to hand. So start as you mean to go on i.e. gear the property on purchase with a mortgage, ideally 75% to 80% loan to value mortgage. Continue reading Get into High Gear with Gearing


So you think you know what really caused the Credit Crunch? Financial Advice, Guest Columns, Property Investment Strategies

Well think again, but before I tell you what really caused the credit crunch, I must first explain why I wrote this article.

Recently after reading several books on property investment, each offering up their own reasons for what caused the credit crunch/ property crash it was clear that the real reason was being missed. Contributing factors just like a runny nose and a sore throat are just symptoms of a cold; they are not the actual cause. Continue reading So you think you know what really caused the Credit Crunch?


Making Overpayments on Your Mortgage Buy to Let News, Cautionary Tales, Financial Advice, Property Investment Strategies, Property Market News, Tax and Accountancy

In the last month I have received letters from three of my mortgage lenders suggesting that I should make overpayments on my buy to let mortgages. Their logic is that my mortgage payments have reduced considerably due to interest rates having dropped substantially since I first took the mortgages. They are right! I’m paying less than half what I used to pay as these are base rate tracker mortgages and the base rate is now 0.5% where it used to be 5%.

That’s a 90% reduction in base rate, lovely!

Am I going to take their advice?

Am I heck as like!

If I make overpayments on those mortgages, what are my chances of ever being able to borrow at those rates again? Continue reading Making Overpayments on Your Mortgage


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