Dear Delia

Dear Delia My client is looking to buy his first buy-to-let property. The purchase price is 185,000 and he has a 20% deposit, but he needs to make an offer quickly to secure the sale. He intends to build a buy-to-let portfolio and is looking for a lender he can form a long-term relationship with. Although he is conscious of rates he doesn\'t want to remortgage his portfolio every couple of years. What are his options?

Delia says: Your client’s situation is not uncommon. Julie Johnston of Mortgage Intelligence and Andrew Egerton of BM Solutions look at the possibilities. Have you got a problem for Delia?


Intermediary response
Julie Johnston is head of mortgage products at Mortgage Intelligence
Building a buy-to-let portfolio takes time. In the first instance, your client must ensure that the properties he’s considering are suitable, cost-effective and most importantly rentable.

Using one lender to fund the portfolio has its benefits because as it builds up the lender gets to know the client better and in some cases can offer forward-buying facilities.

GMAC-RFC will lend a maximum aggregate borrowing amount of 3m up to 25 properties and Mortgage Express will lend up to 5m. Both have online facilities to ensure speedy offers.

Woolwich will lend up to 5m with no limit on the number of properties. Your client can apply for a credit line facility and use any product from its core range.

Paragon Mortgages specialises in professional portfolio lending with the facility to borrow a maximum of 20m with no property limit. As it specialises in the sector it can arrange a forward-buying facility that is valid for 12 months.

All applications submitted within this time are subject to valuations and credit searches. This will make buying future properties a streamlined and rapid process, helping your client to build his portfolio with ease. However, the initial application will need to be full status so it could take longer – a problem if your client wants to move quickly.

Moving mortgages or portfolios is not as difficult or expensive as your client may think. Many lenders offer incentives to new borrowers, including free valuations, free legal or cashback options. So it’s always advisable to consider other lenders and rates in the market with each purchase and at the end of each rate term.

More lenders are seriously considering customer retention and BM Solutions offers a range of product transfer rates for existing customers while still paying full proc fees to brokers, as it recognises they still need to research the market for their clients.

The process is straightforward, taking a maximum of five working days, and the application is submitted through BM Solutions’ One Minute Mortgage system. Its maximum aggregate borrowing is 10m across the HBOS group, with no limit on the number of properties.

Recent press coverage has highlighted the need for good tax planning when purchasing buy-to-let properties. I would recommend your client seeks the advice of a tax expert before making any decisions.

Lender response
Andrew Egerton is senior product manager at BM Solutions

Your client is one of many home owners looking to enter the buy-to-let market. In a recent survey, almost 3.9 million of them said they had aspirations to get involved and 900,000 are planning to do so in the next three years.

In April, both rental incomes and property values increased while yields remained steady. These are helpful conditions in which to build up a portfolio.

With regard to your client’s case, his 20% deposit will enable him to choose from a full list of buy-to-let lenders, as the industry standard maximum is now up to 85% LTV, although some lenders offer up to 90% LTV.

When choosing a lender, your client should be mindful of his plans to build a portfolio and ensure the firm chosen can accommodate this.

For example, with BM Solutions, landlords can build a property portfolio of up to 10m across the HBOS group and up to 1m per property. In addition, we use a tiered rental calculation structure, offering products at 125%, 110% and 100% cover, allowing landlords to tailor products according to their needs. This approach will help your client find suitable products when expanding his portfolio.

Application-to-offer times have been one of the market’s biggest talking points this year. Service propositions are important for brokers and customers, and depending on the circumstances your client should be able to find a lender that can release funds in a timeframe that suits his needs.

For example, the One Specialist IT Index recently found that our average application-to-offer time was four days quicker than the industry average.

Depending on your client’s product requirements, there are a couple of ways he could build a long-term relationship with us. For example, he could choose a longer term deal like our 125% cover, three-year fixed rate product at 5.59% with a 1.5% fee.

And to reduce the impact of remortgaging on customers, we also offer product transfers. Brokers using product transfers to move their existing customers with us onto new deals are saving their clients time and money while earning full proc fees for themselves.

Figures show that our product transfers take just over 24 hours on average, nearly 10 times faster than the remortgaging offered by our competitors.

Product transfers provide choice for consumers, reduce the time spent on administration, reward brokers with full proc fees and provide lenders with the opportunity to extend and strengthen their relationships with clients.