Lender response

James Mayne, head of strategic development at Britannic Money, says a fully flexible buy-to-let mortgage will allow the Smiths to raise the capital needed to set up house abroad.

The first thing the Smiths should consider is a remortgage to a flexible or Current Account Mortgage. They have some savings but they obviously need more for their intended move abroad. A flexible or CAM is an ideal savings vehicle because its give the borrowers the chance to save at the prevailing mortgage rate. This is a lot higher than many traditional deposit rates and it is tax-free. Overpayments can be either regular or lump sum amounts and can be made whenever it suits them for whatever amount.<.p>

For example, if the Smiths remortgaged to Britannic Money&#39s two-year 4.49% fixed rate (5.89% thereafter) and overpaid by £200 each month, after a couple of years they would have built up a drawdown facility of over £5,000. While this may not be enough to put down a substantial deposit on a business abroad it is certainly a good start.

By remortgaging to Britannic Money, the Smiths would then have the added bonus of being able to convert their residential CAM to a fully flexible buy-to-let mortgage when they eventually do decide to move abroad.

This would provide them with the opportunity to raise additional capital for their life overseas but would also mean that the property would be retained for when they want to return to the country. At that time they would be classed as ex-pat borrowers and so would need to be employed abroad to satisfy the underwriting criteria.

For example, on a property value of £180,000 and based on an assumptive annual yield of 7%, they could return a monthly rental income of £1,050. This would easily allow them to borrow £126,000 on a buy-to-let basis and raise up to £50,250 in additional capital to assist with setting up their business venture and/or home abroad.

Being the only lender in the market that offers full flexibility on all of its buy-to-let products, Britannic Money can help the Smiths make their money work even harder.

Assuming that their rental income is £1,050 (using an indicative interest rate of 5.51% or LIBOR plus 1.5%), their rent could cover their mortgage and fund an overpayment of £277.50, which, assuming this was maintained throughout, would save them a staggering £48,736.36 in interest and take 10 years and two months off their mortgage term.

Having a flexible buy-to-let mortgage would mean the Smiths could choose to use some of its other useful features should they need to. For example, there will no doubt be times when the property is between tenants or requires essential maintenance work. The credit facility built up through their overpayments could be used to offset such events and ensure a smooth running account.