Access to buy to let Mortgage with no early repayment charge great for Landlords.
What are the rates and fees do I get with a no ERC product?
What do I need to have access to this mortgage with no ERC?
As one of London’s leading buy to let brokers we come across this question quite often. Now there may be a variety of reasons why someone would want to get a buy to let mortgage with no tie-ins and in this article I will try to put some scenarios in place on why somebody would want this type of product and of course give you some information about fees and rates.
Six reasons why people want a buy to let Mortgage without an early repayment charge
1) Want to develop the property and sell it on within a short space of time but do not want bridging finance because of the costs involved.
2) Looking to purchase the property as a buy to let with a view of letting it for one year before converting it to a residential home and mortgage.
3) Looking to develop the property, for example add an extension, and want the option to remortgage the property based on its new and higher value after the work has taken place.
4) Need flexibility of withdrawing funds (remortgage) should there be another buy-to-let they want to purchase quickly.
5) Plan to sell other properties and reduce the balance on this one.
6) Freedom to switch into a 5 year fix when rates look like they are set to rise.
GENERAL CRITERIA FOR NO EARLY REPAYMENT BUY-TO-LETS
- Must be a current residential homeowner.
- Purchase or remortgage (not first time buyers).
- Minimum 25% deposit.
- The tenants cannot have DSS assistance with their payments or be close family members.
- Minimum property valuation £75,000.
- Minimum earned income £25,000.
- Portfolios up to £5m.
- Terms up to age 80 years.
- Excellent credit record.
EXAMPLE OF NO EARLY REPAYMENT BUY-TO-LET MORTGAGE PRODUCTS
Based on a purchase price of £175,000 and an interest only mortgage of £131,250 over 25 years.
Product One: 2 Year LIBOR Tracker
Initial pay rate 3.80% (APR 5.4)
Valuation Fee £Free / Arrangement fee £1,312.50 / Admin fee £150
Currently at £415.63 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 £585.16 per month.
There is a funds release telegraphic transfer fee of £50. There are no main early repayment charges. On full redemption there is a funds release fee of £90 and a sealing fee of £150.
Product Two: Lifetime Variable
Initial pay rate 4.05% (APR 4.2)
Valuation Fee £Free / Arrangement fee £749 / Booking fee £250
Currently at £442.97 per month for the life of the mortgage.
There is a telegraphic transfer fee of £20. There are no main early repayment charges. There is a mortgage discharge fee of £125 on full redemption.
If you are planning to renovate and move the property on make sure you do your research thoroughly. Spending £30,000 on an extension might only add £30,000 to its value!
There is not much competition between lenders for this space as they do not want business that is unlikely to stick with them long term; as such the rates and set up charges are not as low as they could be.
Hopefully this article has given you an insight into want can be achieved to make your capital work effectively for you.
I would not be one of London’s top brokers if I didn’t have a few tricks up my sleeve and buy-to-let applications without tie-ins need to be positioned correctly to the lenders otherwise they can get very nervous.
For more information on buy to let mortgages with no early repayment charges please contact us on (020) 7993 2044 or alternatively complete the online enquiry on the right-hand side of this page.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.