Borrowing maximum on Buy to Let mortgage by choosing a lender with Best Buy to Let Mortgage Rental Calculation
Rental calculations have hardened considerably since January 2017 following the PRA review, and it has left Landlords questioning: what is the best Buy to let Mortgage Rental Calculation currently available?
Releasing equity from portfolios has been key to empire building and in the past we have since rental coverage as low as 100% at payrate allowing you to take out the maximum as a mortgage. In the last twelve months, most have been calculated at 125% based either on the payrate or a national figure. Generally speaking for individuals purchasing or remortgaging those heady days are over as the PRA has directed Buy to Let Mortgage Lenders to be more prudent against greater taxation in April and the prospect of eventual rate rises.
Can you still get a mortgage rental calculation based on payrate?
In short ‘yes’, however, these are now reserved for 5 years (or longer) fixed rates. Further discretion can apply to mortgage applications under a limited company rather than a personal name.
If this is not the case then notional rates, typically 5.50% currently will be used by Buy to Let Mortgage Lenders to provide the buffer.
Can you still get a mortgage rental calculation based on 125%?
In the main these are reserved for basic rate taxpayers otherwise a greater factor, typically 145% will apply.
You might think great I’m a basic rate taxpayer but fast forward to April when gross rental income counts towards your tax bracket? Lenders are duty bound to factor in future sustainability so are already applying the April changes in their rental assessment.
You can think laterally; if you partner is destined to be lower tax payer you could consider holding the property in their name. Some Lenders will also accommodate this strategy a stage further with properties held by tenants in common 99% / 1%.
Limited company mortgages are likely to remain at 125% for the foreseeable future. However, Lenders may start to question the company’s intentions i.e. to pay regular profit to shareholders rather than simply retain properties for capital growth, as net dividend income also set to be taxed for the first time.
My rental calculation does not fit my mortgage – Is there a way around this?
Some Buy to Let Mortgage Lenders will factor in surplus disposable earned income (see my separate blog on the subject).
Also if it is a straight-swap remortgage ‘pound for pound’ Buy to Let Lenders have the authority from the PRA to override their standard position on rental calculations to avoid an anti-competition buy to let remortgage trap being created.
What is the Best Buy to Let Mortgage Rental Calculation on the market?
Well, products come and go but we are quoting this 2 Year Fix on a regular basis at the moment which applies 125% @ 5%. It allows borrowing up to 80% as Landlords want to draw out as much as they can whilst the going is still good.
Example Product Rate and Fees – Best Buy to Let Mortgage Rental Calculation Coverage
Initial Rate: 3.38%
Subsequent: 5.50%
The overall cost for comparison 5.08% APRC
The total amount you must pay back, including the amount borrowed is £514,769
Features / description:Rental calculations from 125% at pay rate (depends on tax banding). Low early repayment charge from year 2 onwards.
Type and initial benefit period
Fixed for 5 years.
Minimum deposit / equity
25%
Valuation fee
£370
Booking fee
£150
Lender arrangement
£2,995
Telegraphic transfer / CHAPS fee
£35
Lender Legal fee charged to your solicitor
TBC
Early repayment charge
2/1/1/1/1% of the amount repaid in the fixed period
For more information on Best Buy to Let Mortgage Rental Calculation Product please call complete the enquiry form on this page or call 0207 993 2044.
Any property used as security, which may include your home. may be repossessed if you do not keep up repayments on your mortgage
Important Information
Residential and Buy to Let Mortgages
Rates current at 19/11/2019. The overall cost for comparison is based on an open market value of £300,000 over a 25 year term. Right-to-Buy examples are based on a discounted purchase price of £200,000. Repayment for Residential and Interest only for Buy-to-let (unless otherwise specified). Eligibility will depend on your own personal circumstances.
KEY – ERC = Main early repayment charge.
The purpose of this web is for information only and is based on a fictitious illustrative scenario. It does not constitute a Mortgage Offer in any way.
It is essential that you seek independent mortgage advice as a suitable product will be based on your own individual circumstances. An interest rate should not be read in isolation, and you should refer to your personal key facts illustration and Mortgage Offers for full terms and conditions. If anything is unclear it should be discussed fully with both your mortgage and legal advisors before entering into a mortgage contract with the lender.
The information contained herein is based on research through the Trigold (IRESS UK) sourcing system. When first published to this site the data is normally 24 hours behind real time, and may or may not still be available.
A first charge over your property is required as security for the loan.
The formal mortgage offer of an advance will be subject to a valuation and other satisfactory references.
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
