Castle Trust has launched a flex-to-buy mortgage to help landlords complete quickly on new purchases when the opportunity arises.
Flex-to-buy – or ‘hunting license mortgages’, as the lender refers to colloquially – are standby loans secured against the value of an existing buy-to-let property.
The facility can be drawn down at short notice when the borrower needs to deploy funds quickly and simply, such as at an auction.
No interest is charged until funds are drawn and all interest is rolled up and paid at redemption – so there is no cashflow strain during the period of the mortgage.
Castle Trust says the minimum facility is £250,000 and the maximum is £5m, with more by negotiation.
The cost is a flat fee of 2 per cent to secure the undrawn line.
The 12-month loan term does not start until the first tranche is drawn and there are no early redemption charges six months after the first tranche is drawn.
Castle Trust executive director Matthew Wyles says: “Landlords can create a lot of value by being able to move quickly on a purchase. The flex-to-buy product gives active investors an ability to sign contracts at the drop of a hat, secure in the knowledge that they have committed funding already in place.
“The condition of the property being acquired is irrelevant because the flex-to-buy is secured on existing assets. The facility can be renewed annually if required.
“Our research has confirmed that there is a clear gap in the market for this type of product and we are looking forward to working with our intermediary partners to create real competitive advantage for them and their clients.”