Aldermore offers an 80% buy to let mortgage product – but is it any good?
Aldermore Bank is a relatively new lender whose main focus is on the professional landlords market of the buy to let sector. Like The Mortgage Works (previously reviewed) they do have an 80% buy to let product for purchases and remortgages which is targeted at experienced landlords.
The definition of an ‘experience landlord’ in their eyes is typically someone who can prove rental income for the last 6 months from a property which they own.
Aldermore also tries to attract landlords who operate in the middle to high loan end of the market by offering a flat fee of £1999 on some of its 80% buy to let mortgage products.
The loan sizes of up to £400,000 are available on its 80% buy to mortgage product which is higher than the £350,000 offered by The Mortgage Works, and means you could purchase a buy to let at £500,000 with a 20% deposit.
The lender allows ‘gifted deposits’ from family.
Recently the Aldermore Bank has changed their stance and now permits the arrangement fee to be added to the loan. Previously the arrangement fee was deducted from the advance, which was a real annoyance, and meant by definition that it was not a ‘true’ 80% buy to let mortgage product.
Example of current Aldermore 80% buy to let mortgages
Based on a purchase price of £200,000 and an interest only mortgage of £160,000.The costs quoted assume that the lender’s fee for arranging the mortgage are added to the loan.
There is a telegraphic transfer fee of £30 and a current sealing fee of £90 on full redemption. The main early repayment charges are 5% of the amount repaid in the first year and 4% in the second year. Overpayments of up to £5,000 can be made per annum during the first 2 years without the main early repayment charge applying.
Product 1: Percentage Arrangement Fee
Initial pay rate 4.48% (APR 5.9)
Valuation Fee £410 / Arrangement fee £4,000 (2.5% of £160,000 mortgage)
Fixed at £612.27 per month for 2 years. After this period the mortgage will revert to the lender’s variable rate at the time. Based on today’s prices this would be £783.10 per month.
Product 2: Flat Arrangement Fee
Initial pay rate 4.98% (APR 5.2)
Valuation Fee £410 / Arrangement fee £1999
Variable, currently at £669.62 per month for the term of the mortgage.
The standard minimum earned income requirement is £25,000 for employed or self-employed, however this is relaxed if you have owned a property for over two years and paid tax on the rental income (i.e. the property has made a profit).
Aldermore Bank tries to covert professional landlords with experience and will generously lend on up to seven properties. And, there is no maximum limit on the number of properties with other lenders.
They are generally unfussy on the reason for raising capital by way of remortgage, and can in some instances release money for business purposes which is uncommon.
The maximum age at the end of the term is 85 years which is competitive.
Their degree of underwriting does vary depending on the loan to value with understandably the fiercest requirements imposed on their 80% buy to let product, but they are still not over onerous when compared to other lenders.
They often have a lifetime variable rate option within their 80% buy to let mortgage range which can prove to be attractive to those who are uncertain of their future earned income or close to retirement.
The rental coverage calculation they apply generally works out quite well and they do have a quick decision in principle process with us.
Aldermore Bank may also be tolerant to minor credit issues that are occurred 3 years ago but I suggest you speak to us first on this one to make sure that the case is positioned correctly.
My own opinion Aldermore Bank is more receptive to landlords with established property portfolios and lower LTVs. They have probably felt unduly pressurised into offering an 80% buy to let product as a ‘new comer’ to make their mark. Their underwriting is by their own omission much more slick at 70 and 75% which is nothing to be ashamed of.
Like The Mortgage Works they use E-Surv and from my experiences they are very cautious when assessing property values. This is offers built-in protection for the lender but is not so good for the borrower. This particularly prevalent where there is a high loan to value borrowing such as an 80% buy to let mortgage is sought.
The minimum term of 10 years can be counter productive, particularly for the elderly who were looking to capitalise on the 85 year maximum criterion.
The affordability calculation they apply must cover the advance and any fees added to the loan which could be restrictive.
For the full information on products and rates and fees please complete the enquiry form on the right-hand side of this page or alternatively call us on T: (020) 7993 2044.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.
The views expressed in this article are based on my own personal general opinions and experiences, and they are not necessarily shared by Niche Advice Limited or other Mortgage Brokers. Rates correct as of 11/09/2013.