James Cotton, mortgage specialist at London & Country, explained that the rental cover option offered by GMAC-RFC was ‘interesting’ as by paying a higher fee the investor does not need as much rent but the other side of the coin is that for a given rent, more can be borrowed.
He said: “This is a welcome push and an innovative product in the buy-to-let market. As far as I’m aware this is the only product of its kind in the sector and it’s important that brokers embrace it with the correct investor in mind.
“Of course we, as brokers, treat cases on their merits but this particular product tends to favour the professional landlord rather than a new buy-to-let investor and it’s important to take this into account.”
The option allow the borrower to choose a rental assessment of 100 per cent, 110 per cent or 125 per cent of the monthly mortgage interest. The interest rate and LTV does not change by virtue of exercising a lower rental assessment option.
The only change is the one-off capitalised arrangement fee which GMAC believes to be a fairer method of charging for the extra risk than loading the rate or cutting back on the LTV.
Jeff Knight, head of marketing services at GMAC-RFC, said: “We are experiencing record levels of business in both non-conforming and self-cert.
“Now we want to blaze a trail across the buy-to-let sector through some innovative product design.
“Some lenders have introduced niche options for 100 per cent rental cover but at heavily loaded rates or low LTV, giving with one hand while taking with the other, whereas we believe in genuinely good deals.”
