The new options allow the borrower to choose a rental assessment of 100 per cent, 110 per cent or 125 per cent of the monthly mortgage interest. GMAC said, unlike any other buy-to-let product currently available, the interest rate and LTV does not change by virtue of exercising a lower rental assessment option.
The only change is the once-only, capitalised arrangement fee which it believes is a fairer method of charging for the extra risk than loading the rate or cutting back on the LTV.
One of the key issues currently slowing down the buy-to-let market is that rental yields are falling and are not always covering the mortgage interest plus 25 per cent – the typical criteria of most lenders.
By reducing the amount of mortgage interest that the projected rent needs to cover, GMAC-RFC said it is giving a welcome boost to this high-performing sector of the mortgage market.
Jeff Knight, head of marketing services at GMAC-RFC, said: “Some lenders have introduced niche options for 100 per cent rental cover but at heavily loaded rates or a low LTV, giving with one hand while they take with the other, whereas we believe in genuinely good deals.”
GMAC-RFC is offering its improved BTL criteria alongside its automated decisioning technology, giving brokers access to an immediate and definite mortgage decision within an average of 35 seconds.
The variable rate products on which the new rental assessment is offered include a discount of 1.25 per cent/1.00 per cent to 1 July 2007 from the lender’s SVR to 75 per cent LTV/85 per cent LTV respectively; a full-term tracker linked to Base Rate of 0.95 per cent/1.15 per cent to 75 per cent /85 per cent LTV respectively.
John Stewart, director of PMI Independent Financial Advisers, said: “It’s good to have some flexibility and not worry about the rental cover. But as these products could be high risk for GMAC there will be a charge somewhere; in this case it’s the arrangement fee.”
