Experienced buy to let (BTL) investors will have noticed the recent changes in Prudential Regulation Authority (PRA) guidelines has made BTL borrowing increasingly difficult. If you’re a prospective first time landlord, you’ll no doubt find these changes off-putting as increased stress testing does mean BTL investment may seem less appealing.
The new regulations certainly pose a challenge. Previously, lenders would expect to see in the region of 125% rental coverage. In line with the new regulations, lenders are seeking 145% of the mortgage payment from rental income, with a stress test of 5.5%. In its simplest terms, this means you’ll be able to borrow less money than before.
Of course, there are specialist BTL lenders who will allow higher borrowing than the PRA calculation. But more extensive affordability testing means you may incur an arrangement fee between 1.5%-3%. This alone could put off a potential investor, but this shouldn’t signal the end of your plans. At Enness, we pride ourselves on our ability to discuss your circumstances in depth, working hard with a range of lenders to find a product that suits your needs.
We are currently working with a lender who is offering a fixed buy to let mortgage product with a rental calculation of 125% at 4% for basic tax rate payers, or 140% for higher and additional rate tax payers. This product will therefore allow landlords to increase their borrowing on a BTL property.
But the key appeal of this product is that it is being offered with no arrangement fee and a free basic property valuation. This could save you valuable money up front. Furthermore, the product is offered on a 5-year fixed interest rate of 3.7%, at 75% loan to value (LTV). This gives potential borrowers the peace of mind of knowing what their repayments will be for the period of the term.
- Rate of 3.7%
- 5-year fixed rate
- Rental calculation of 125%
- 75% LTV
To qualify for this product, your portfolio must not exceed five mortgages with a total borrowing of no more than £1million. You’ll need a minimum income of £25,000 per annum and have purchased the properties in your own name.
If this sounds like you, or if you have any questions, we’d be delighted to talk. We can advise both first time and experienced landlords, using our extensive experience to support you through the process.