BTL Remortgage Stress Test rates

MrChips81

Whilst I'm waiting for my previous mortgage advisor to come back, I thought i'd throw it out here for discussion too. We have a BTL property, tenants in place wanting to stay for at least another 2yrs.

Currently on a tracker with no exit fee, so started to check whether it might be worth fixing again for a better deal, however since March 2016 the rental calculation stress test rates have risen from 125% at 5% to somewhere around 140% at 5.5% for the majority of lenders.

We get £1245 a month rent, against a loan of 220k, so we pass the original stress test but not those for new customers.

So... when looking at moving to another mortgage provider, are there any that are recognised to look at your existing arrangements and not stress test at the same as someone looking to purchase a BTL?

Thrugelmir

MrChips81 wrote: »

So... when looking at moving to another mortgage provider, are there any that are recognised to look at your existing arrangements and not stress test at the same as someone looking to purchase a BTL?

What's the difference? The point at issue is that it will be a new mortgage and therefore subject to current regulation.

Lilla_D

As you said, MAJORITY lenders offer 140-145% at 5.5%, but not ALL, so the answer is already there: yes, there are lenders, who can offer a different stress test.

Some lenders will offer a lower stress test if you're a basic rate tax payer and/or take a 5yr fix and/or you take a like for like remortgage without capital raising. So yes, there are lenders who will treat differently a remortgage from a purchase.

And some lenders just offer a lower stress test to everyone.

Ps. Just to say, the new stress test came into effect following the regulatory changes as of Jan 17, not Mar 16.

getmore4less

What is your current tracker rate?
What options does your current lender have for product switching?

Any new lender has to better those.

kingstreet

Don't offer a tenancy longer than a year as there are many lenders which have that as their limit. We recently found this when we discovered one of their clients had let under a two year AST.

As Lilla has said, the rental income cover calculation now depends on your personal tax rate and on the duration and type of mortgage product you take.

There are also lenders not governed by the Prudential Regulation Authority (PRA) still working on 125%.

Your best move is to speak to an independent broker about your options.

MrChips81

Thanks all,

So far 2 independent brokers have only found one lender who will test at 125% which was Santander, hence me looking for some general advice.

We're currently on a tracker 2.5% above base, so 2.75% overall rate, with Santander offering a rate at 1.44% fixed for 2yrs. Current lender has no rates better than what we're on.

The house is jointly owned and run with me being a higher rate tax payer and my wife being a basic rate payer.

I'll raise the query over whether the lender would have an issue with an AST longer than 12 months. We have good tenants and they wanted the longer one to protect against any rent increase so it works for both of us. If the lender doesn't like it then i'm sure it'd be fine on another 12 month AST anyway.

Does anyone know which these other lenders are that don't test, or have some rates available with stress tests of under 145% ?

Cheers
MrChip

chopper78

MrChips81 wrote: »

We have a BTL property, tenants in place wanting to stay for at least another 2yrs.

We get £1245 a month rent, against a loan of 220k, so we pass the original stress test but not those for new customers.

Is the problem that your rent isn't high enough? Maybe that is why your tenants want to stay and lock it down for a couple of years if you are the cheapest in the area. £1245 a month is an 8% yield on a property with £185000 value. If you have a loan of £220k, and assuming 75% LTV, then you are sitting on a £300k property at which point the rent should be more like £2000?

What are like for like properties renting for?

MrChips81

Like for like are renting for around 1100, we're outperforming the rest due to the location and size of garden, parking. The house was our home previously so if you were to look at it as a new BTL now, the returns don't stack up well.
Current value is anywhere between 350 and 400 due to some crazy rises recently in the area (we're close to Crossrail, and the M4 corridor).

i'd be interested to hear where £300k places renting out reliably for £2k a month!?

We have the advantage that ours is 2mins from home so i manage it all myself so that came into the consideration when we decided to keep it and rent it out.

getmore4less

MrChips81 wrote: »

.....
We're currently on a tracker 2.5% above base, so 2.75% overall rate, with Santander offering a rate at 1.44% fixed for 2yrs. Current lender has no rates better than what we're on.
........

Don't those come with a £2k fee

Current value is anywhere between 350 and 400 due to some crazy rises recently in the area (we're close to Crossrail, and the M4 corridor).

That is putting your gross yield at 4.3% and dropping rents should be climbing on the back of the same factors.

Lilla_D

MrChips81 wrote: »

So far 2 independent brokers have only found one lender who will test at 125% which was Santander, hence me looking for some general advice.
...
Does anyone know which these other lenders are that don't test, or have some rates available with stress tests of under 145% ?

Since there are a growing number of lenders offer stress testing below 145% subject to T&Cs, it seems that there are other factors in your personal circumstances or due to the property itself that made the brokers say that only Santander fitted bill. As such, we can't give general advice, because this forum is not the right platform where all details can be revealed and discussed. See a 3rd broker and see what they say. It's unlikely that you end up with 3 brokers who know of no other lender offering a lower stress test than Santander.

MrMortgages

Find another broker, highly unlikely that Santander is your only option on this!