Help with Bank of Scotland BTL mortgage

bigpat

Hi,

My wife and I bought a flat as an investment and got a 3-year-fixed buy-to-let mortgage with Bank of Scotland. The rate is 5.29% and comes to an end in June.

We borrowed £79k against a valuation (at the time) of £93k. While I'm confident long-term that the property will be worth well more than this when we sell it for a pension pot in about 20 years, it's NOW probably worth around £85k which of course means our LTV has gone over 90%. Presumably this seriously restricts our options in the BTL market?

The mortgage offer says that this rate will be "followed by a variable rate which is 1.95% above the Bank of Scotland Base rate currently 4.5% [i.e. in May 2006] until the end of the repayment period...Bank of Scotland Home Loan Rate (our standard variable rate) is the base rate which applies to this mortgage".

On their website I found this document..http://www.bosmortgages.co.uk/pdf/buy-to-let-mortgages.pdf..which says right at the bottom that the Home Loan rate is currently 7.35%. So if I'm understanding this correctly - and I hope I'm not - that means our rate is going to jump to 9.3%! That can't possibly be right, can it?

In light of what's happened to interest rates, I was hoping our payments would come down when we switched to a variable rate. Can anyone advise on what our options would be with an LTV of over 90%?

The really frustrating thing is that we have nice tenants in there, they keep the place well, they pay rent on time and I bend over backwards to keep them happy by staying on top of minor repairs etc. We're happy with them, they're happy with us and the rent is covering the mortgage and service charge, plus about £40 a month on top. Everything's going great in other words, if we could just keep it like that.

I be really grateful for some help. Thank you.

silvercar

I don't think you are reading the footnote correctly. Those mortgages linked to the footnote revert to the home lona rate of 7.35% when the fixed period ends. You would not be eligible for the rates on that table as the highest LTV I can see is 85%.

From this:

The mortgage offer says that this rate will be "followed by a variable rate which is 1.95% above the Bank of Scotland Base rate currently 4.5% [i.e. in May 2006] until the end of the repayment period...Bank of Scotland Home Loan Rate (our standard variable rate) is the base rate which applies to this mortgage".

It looks like your rate will go to a variable rate which is 1.95% above the BoS base rate. This is currently 0.5%, so your rate would be 2.45%. The last sentence usually applies if you don't keep to the terms of the mortgage (eg get into arrears, then all deals can be cancelled and you revert to their SVR which was 7.35% when that leaflet was printed.

Looks like you have a good deal:)

hearts

silvercar wrote: »

I don't think you are reading the footnote correctly. Those mortgages linked to the footnote revert to the home lona rate of 7.35% when the fixed period ends. You would not be eligible for the rates on that table as the highest LTV I can see is 85%.

From this:



It looks like your rate will go to a variable rate which is 1.95% above the BoS base rate. This is currently 0.5%, so your rate would be 2.45%. The last sentence usually applies if you don't keep to the terms of the mortgage (eg get into arrears, then all deals can be cancelled and you revert to their SVR which was 7.35% when that leaflet was printed.

Looks like you have a good deal:)

The BoE base is .5% . I don't think the BoS base is 5% though. Or is it?
I have one with th BoS and I'm sure it reverts to 1.99 above BoE base. Check yours.

dimbo61

If you are indeed paying less in june/july then overpay every penny you can on your home mortgage and then the BTL mortgage.
Try and have at least 25/30% equity in the BTL property by paying some of the mortgage off !
I know you can offset the interest part of the mortgage against your TAX bill at the end of the day being mortgage free gives you a good income and security.

bigpat

Thanks everyone for the replies so far. You've given me some optimism at least.

Silvercar, the thing that still bothers me is that this wasn't an old leaflet I was reading. The rates listed are what I found on their website TODAY by clicking the link near the bottom of this page http://www.bosmortgages.co.uk/buytolet/
I realise it's dated Aug 2008, but if it's not been updated, then aren't those the rates they're currently charging? I know we wont be eligible for any of the deals in that table with an SVR of over 90% which is why I'm worried we'll be stuck with the 'Home Loan Rate' +1.95%

Bank of Scotland Home Loan Rate (our standard variable rate) is the base rate which applies to this mortgage

Doesn't this mean that they have a different "base" rate for this mortgage and that (according to their website today) it's 7.35% ? Man, I hope you're right and I'm wrong!

dimbo61, if we do come down to a rate of 2.45% (and if my calculations are correct) that will save us almost £187 a month! I'm in two minds about what to do with that
(a) overpay home mortgage £95k at 6.09% fixed until Dec 2010
(b) overpay on the flat's mortgage

At first glance it seems to make sense to overpay the one with the higher rate, but somehow I think it's wiser to try to reduce the LTV on the flat, which would give me some options in the BTL market.

Maybe a bit of both?

But I could be counting my chickens before they're hatched here. I'll have to wait until Monday when I can get hold of someone at BoS. Shoulda done it this week!

Gorgeous_George

bigpat wrote: »

The mortgage offer says that this rate will be "followed by a variable rate which is 1.95% above the Bank of Scotland Base rate currently 4.5% [i.e. in May 2006] until the end of the repayment period

BofS base rate is 0.5% (link) and I think silvercar is right.

Overpay the highest rate.

Good luck!

GG

beecher

You need to find out if you're going onto a tracker above the base rate, or the Home Loan Rate. It is v confusing. The fact that they quoted the 4% rate makes me think it tracks the base rate, ie 1% as the BoE base rate was indeed 4% in May 2006.

However when you look here

http://www.bankofscotlandintermediary.co.uk/pdf/standard-rate-guide.pdf

it says

Summary of BoS Mortgage Products

21st February 2009

Bank of Scotland Home Loan Rate 4.84%

Bank of Scotland Bank Rate 1.00%

and presumably the last interest rate cut is still to be applied to them both. So matter what, you'll be paying less than 9.3% if that helps!

bigpat

Thanks GG, but that's their "normal" base rate isn't it? My mortgage offer says that the Home Loan rate is the base rate they will apply to this mortgage.

Beecher, you've obviously found a more recent link than mine.

You need to find out if you're going onto a tracker above the base rate, or the Home Loan Rate.

As quoted in my first post, our rate will be "..followed by a variable rate which is 1.95% above the Bank of Scotland Base rate currently 4.5% [i.e. in May 2006] until the end of the repayment period...Bank of Scotland Home Loan Rate (our standard variable rate) is the base rate which applies to this mortgage".

If you're right and the 4.84% has dropped another half-point, and then we pay 1.95% on top, that will cost us an extra £66 a month. Hmmm...not good news, but at least not the firestorm of 9.3% I've been dreading.

hearts

As Goreuous George pointed out. The BoS base is 1% or there abouts so you will go onto this + 1.95.
I have a few BoS BTLs and they all go onto BoE + 1.95.

bigpat

Thanks hearts, I'm certainly more optimistic now, but still no-one has explained the text in red above and why that wont apply.

silvercar

The red text is the base rate that applies to the mortgage when it is out of the deal time period. Your deal is in two parts, the fixed rate followed by a variable rate at 1.95% above the base rate. As the second part of your deal continues for the life of your mortgage you will never move onto the red text, unless you reached the end of the (25 year?) term and wanted to extend the mortgage period.