Investment overdrive

Grant Bather

March 29, 2008

Minimum earned income stipulations, increasing arrangement fees, loan-to-values and rental calculation rules are all combining to make his life difficult.

Where can he find a lender who is not going to let him down, will weather the current difficult market conditions and give him a competitive, straightforward deal?

Bob Gore is senior account manager at Chelsea Building Society

David is already benefiting from the growth seen in the buy-to-let market over the past few years and wishes to build on this for the future.

Chelsea Building Society’s buy-to-let range will enable him to make an informed choice regarding product rate versus fee payable with a choice of four fixed rate and three tracker mortgage products.

Coupled with this, there are no earned income requirements, loan-to-value is set at 80 per cent and the rental calculation is 110 per cent of initial pay rate.

If David really wants to make life quick and simple for himself, he could opt to limit his borrowing to 80 per cent loan-to-value and a rental assessment would not be applicable.

Finally, should David have any bad credit problems such as repayment defaults and CCJs, Chelsea Building Society can still help him with the adverse buy-to-let mortgage deal up to a maximum loan-to-value of 75 per cent.

Peter O’Donovan is mortgage manager at Bestinvest

Despite the recent credit problems there are still a number of lenders who offer straightforward buy-to-let deals. Capital Home Loans has reduced its portfolio of products but still lends up to 85 per cent and has no requirement for earned income, basing the rental calculation on the pay rate.

Other lenders like Mortgage Express, Standard Life Bank and The Mortgage Works will also look at the pay rate rather than a margin over Base. NatWest and Bank of Ireland provide a choice of rates depending on the rental income coverage from 110 per cent to 125 per cent. Abbey has recently entered the market with some competitive rates.

While there has been some tightening of criteria, the buy-to-let market has not followed other mortgage areas. There are plenty of lenders where it’s business as usual and some real competitiveness has entered the market. This gives David the opportunity to fit the loan to the product, paying a higher fee if the rental income is tight or taking advantage of a flat fee.

Ying Tan is managing director of The Buy-to-Let Business

The lending market has seen significant change since the last quarter of 2007 and this investor is not alone in finding difficulties when trying to source a remortgage deal.

There is less liquidity in the market and typically lenders are being more selective as to whom they are lending.

Furthermore, the percentage loan-to-value is typically reducing as lenders reduce their exposure to risk, while at the same time rates are increasing as they manage demand for available funds.

In this market it is essential to understand in detail each lender’s criteria to match the borrower with the most appropriate source of funds. These can change at short notice, along with rates, and the use of a specialist mortgage intermediary with in-depth industry knowledge and close relationships with many of the lenders, is the way for a buy-to-let investor to access the best mortgage, both in terms of rates and criteria, for their individual needs.

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