One of the deals comes with no arrangement fee during September, and also gives a full refund on valuation fees. All lending is in sterling, protecting homeowners from any currency risk, and both deals are available for purchase or remortgage.
The exclusive John Charcol product with Scarborough Building Society is virtually fee-free – with a refund in valuation fees, or £350 cashback on a remortgage, plus the limited offer of no arrangement fee, buy to let investors could not only benefit from a low initial rate of 3.49 per cent, but can also take advantage of these mouth-watering freebies.
The second product, with West Bromwich Building Society, allows up to 10 per cent overpayment every year, with no early repayment charges. Equally importantly, the rental cover calculation on both deals is based on the initial Libor-linked pay-rate, meaning most buy-to-let properties will have enough rental income to qualify for the maximum 80 per cent loan-to-value mortgage (85 per cent on the West Bromwich deal), as the property will only need a gross rental yield of 4.68 per cent to take advantage of this rate.
Ray Boulger, senior technical manager at John Charcol, commented: “Buy-to-let now represents a significant part of the overall market, and we are pleased to have developed some highly sophisticated deals with these lenders that, just five years ago, would have been unheard of for your average buy-to-let investor.
“Despite steady increases in US$ 3-month Libor, it is still well over half percent below its UK equivalent, although this differential is likely to narrow in the short term. Providing the average UK three month Libor rate exceeds the average US equivalent by at least half a percent for the three years of the Scarborough deal, the average rate on this mortgage will provide excellent value compared with conventional trackers.”
Rental Cover Calculation
Most BTL mortgages calculate the rental cover required on either the initial pay-rate or a higher notional rate. If the lender uses a notional rate well in excess of the pay-rate it is very difficult to obtain a high loan-to-value mortgage, because the rental yield will often not be sufficient to meet the lender’s criteria.
Boulger continues, “The lower monthly payments required on these mortgages, compared to any other buy-to-let mortgage currently available, will provide a boost for many existing landlords. It also gives new investors, and those planning to expand their portfolio, a great value mortgage for their new property, plus the likelihood of meeting the rental cover requirements needed to borrow the maximum loan-to-value.”
