Buy-to-lets : Which lenders don't abide by the 125% rental value repayment "rule"?

NiceGuySteady

Hello, brainiacs.

I'm presently seeking a new buy-to-let mortgage because my existing one has expired and I've simply reverted to the lender's (Mortgage Works) tracker rate. I'm tempted to seek out a new deal (perhaps a three year deal?) while rates are low and before they have chance to rise again. Until now I've always managed to secure a repayment arrangement rather than interest-only, and I'm obviously keen to continue that in the interests of paying off the loan quicker.

Problem is, unless I'm misunderstanding things, the buy-to-let deals I've been examining so far seem to have a caveat. Namely, that my monthly mortgage repayment cannot exceed 125% of the monthly rental income. This strikes me as an unnecessary hurdle, because I can easily afford (and would like to) pay plenty more than 125% of the monthly rental income, thanks to other assets I have.

So, I suppose the question is, does anyone know of a buy-to-let mortgage deal which doesn't have this 125% stipulation, and doesn't sting you with outrageous fees either (fee-free preferred).

Handshakes and respect, my fellow thrifties :-)

ACG

A few lenders will do 125% of x% based on interest only regardless of whether or not the mortgage is a repayment one.

Its not just the 125% bit thats important its the rate they base it on. Some lenders charge about 4% others will be as high as 6% which can make a big difference.

Thrugelmir

FSA are recommending 145% now under regulatory guidance. Some lenders have moved to this level on new business. Highly likely it could become the norm next year.

AnotherJoe

Just get one that allows overpayments without penalty ( or overpayments within your plans that won't create a penalty)

minimike2

Thrugelmir wrote: »

FSA are recommending 145% now under regulatory guidance. Some lenders have moved to this level on new business. Highly likely it could become the norm next year.

Indeed. Which will result in rents being pushed up even more. Crazy policy.

AnotherJoe

minimike2 wrote: »

Indeed. Which will result in rents being pushed up even more. Crazy policy.

But will it? Or will it result n fewer people becoming landlords and thus less competition for houses and thus prices not rise so fast so more people who would rent buying instead? Presumably that is the aim?

amnblog

Prices rise due to lack of supply.

Thrugelmir

minimike2 wrote: »

Indeed. Which will result in rents being pushed up even more. Crazy policy.

Then LL's should buy cheaper property.

NiceGuySteady

Hi all,

Thanks for the feedback so far, which is as wise as I expected.

Another Joe, you plucked the very thought from my head! A policy which allows overpayments without penalty is exactly the thing I'm after. Do you (or does anyone) happen to know of any, because my hunting is drawing a blank so far (albeit I, like most people, am restricted to using price comparison sites without the benefit of any insider industry knowledge).

Bless you all, what a fine site this is!

Eddie

ACG

Most BTLs do allow overpayments of 10% of the balance per year without any charges.

£100,000 mortgage in year 1 is £10,000 over and above what your normal repayments are. I dont know many people who can afford to overpay that much. If you can then there are some products with unlimited overpayments but not so many. If that is important to you then it would be worth investing in a broker.

NiceGuySteady

Thanks, ACG. The example you give ("£100,000 mortgage in year 1 is £10,000 over and above what your normal repayments are") should be more than applicable for my needs. I've found a Virgin deal which is offering a fee-free three-year deal at 3.19% which allows 10% overpayments. I'm going to seek out some more details regarding that one and see if it ticks all the boxes (and if it doesn't, I'll keep sniffing around). Thanks for the expertise.