There seems to be a lack of awareness among introducers of the products offered by certain specialist buy-to-let lenders
The Prudential Regulation Authority’s changes to affordability rules on buy-to-let are just under two months away. After a year in which landlords have also been battered by the chancellor on stamp duty and withdrawal of mortgage interest tax relief, this latest clampdown on property investors is another smack in the mouth.
That said, new rules usually provide new opportunities. But some of these may not be around for long.
First, there appears to be a lack of awareness among introducers of the products offered by certain specialist buy-to-let lenders. Our panel lenders are willing to look at rental coverage requirements from just 100 per cent/110 per cent. Rates begin from 3.45 per cent over Libor with LTVs up to 75 per cent. There may be geographical restrictions in some circumstances but applications are looked at sensibly and we take into account income generated by the investor’s entire portfolio, as well as their experience of letting property.
Second, we have a number of lenders offering specialist refurbishment-to-term products for properties in need of TLC, with the guarantee of a term product at the end of the refurbishment. What is unique about these products compared to a standard bridging loan is that the interest charged and lender fees are added to the amount advanced. We have clients purchasing property at 70 per cent LTV on a short-term basis and turning this into a 50 per cent LTV term mortgage with the same lender, keeping lender fees to an absolute minimum.
Finally, there is a massive opportunity within the second charge market. Traditionally, lenders operating in this market shied away from the rental property sector. However, over the past several years the number of lenders lending on investment property has quadrupled, with the likes of Precise Mortgages, Prestige Finance and Shawbrook Bank currently very active.
Buy-to-let second charges are already a useful tool for brokers to offer when investors need to raise capital without refinancing the existing first charge mortgage. Second charge loans are currently available from 5.49 per cent with LTVs up to 85 per cent, many with no early repayment charges.
Tony Sutton is managing director of Specialist Finance