Stewart Rennie is product development manager at Network Data
“As this is quite a common scenario the majority of buy-to-let (BTL) lenders would consider James’ application. However, with the relatively low rental yield, he may struggle to raise the maximum amount he wants. He has two main options to consider. The first would be a rate that allows the rental calculation at a low coverage of say 100 or 110 per cent of pay rate for which he can expect to pay a percentage-based arrangement fee from lenders such as BM Solutions or Mortgage Express.
"The alternative is to look at the non-status BTL products such as House2house from The Mortgage Business (TMB) or House Plus from Platform. This will allow him to maximise his borrowing on the property as the rental yield isn’t taken into consideration when calculating the maximum loan amount. Presuming all other criteria was met, James could use the TMB House2house 90 scheme to raise up to around £62,000 for the deposit.”
Mike Fitzgerald is sales director at Brentchase Financial Services
“As James already has a portfolio of BTL investment properties, we would first obtain full details of the portfolio’s value and debt.
"It might be possible to remortgage his entire portfolio and obtain a more favourable rate and raise extra money at the same time. For this example, we will assume that the client does not have a residential mortgage on his main residence and it would be quite easy to give him a good selection of deals from which to choose.
"One particular scheme that I feel may be of interest to the client is with Bristol & West and is a Personal Touch exclusive. The rate is fixed at 5.79 per cent until 30 November 2012, with 10 per cent penalty free repayments allowed. The client could remortgage up to 90 per cent and this would give him up to £62,500 as a deposit. The monthly payment would be £977 per month against a rent of £1,000.”
Thomas Reeh is chief executive at blackandwhite.co.uk
“As James is looking to raise as much as possible, he would be very restricted and likely to pay around 7.75 per cent for a three-year fixed rate where he could raise 90 per cent LTV with Mortgages plc. But he would need 120 per cent rental cover at the pay rate. This would mean the potential rent requirement of £1,440, which is unrealistic, unless the property is in London.
"James would probably be best advised to raise 85 per cent so he could access most high-street lenders. For example, Standard Life has a two-year fixed rate deal at 5.93 per cent and rental cover of 110 per cent, based on a rate of 5.83 per cent. If the loan is below 85 per cent, no verification of income would be required and his rental coverage would be reduced to around £1,100. The difference between the two scenarios of 90 per cent and 85 per cent makes the extra cash of £11,000 look very expensive.”
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