Top Buy-To-Let Mortgage Deals
Mortgage rates are still at historic lows, making it a great time to grab a deal and invest in buy-to-let. To help you find the right deal for you, we’ve asked seasoned landlord and property guru, Richard Blanco, for his advice on the best buy-to-let mortgage deals:
“Buy to let rates continue to be at a historical low. At 60% loan to value, Virgin Money are offering a 2 year fix at 1.59%. At 65% loan to value, The Mortgage Works has a 2 year fix at 1.84% and their 75% loan to value products are also best buys with rates of 2.09% for a 2 year tracker and 2.64% for a 5 year fix. All of these products have a £1995 fee which is common now for the lowest rates.
The Mortgage Works does not set a minimum income level but Virgin Money requires income of at least £25,000. All buy to let mortgages are assessed according to the rental income generated by the property and you will need a high credit score. Note that we are seeing a restructuring in criteria since Bank of England regulation of mortgages began on 1 January 2017. Lenders must now use a stress test rate of 5.5% unless the product is a 5 year fix. Some lenders are also applying 145% mortgage coverage. So that means that the mortgage will be assessed not at these low pay rates of 1.59% etc. Instead the borrower will have to show the rent covers 145% of the mortgage payment at a rate of 5.5%. Fortunately some lenders are still using the 125% calculation, but be aware that this may now depend on your tax status. This is because lenders have to be mindful that after 6 April 2017, mortgage interest will no longer be fully set against tax and therefore landlords paying 40% tax rates will have higher costs.
For landlords considering buying through a limited company, mortgage rates have come down a little. Norwich & Peterborough offer a tracker rate of 3.24% at 75% loan to value with a 1.25% fee. Anybody thinking of buying through a limited company instead of personally should consider whether paying a rate of 3.24% instead of 2.09% is cost effective. It may make more sense to buy the property personally and just pay a higher tax bill.
Most commentators think that Bank of England interest rates will be stable for at least a year and when they start to rise will do so only gradually, so personally I see no reason to be anxious about the future direction of rates in the immediate future. Ultra-cautious investors can of course opt for 5 year fixed rates, some may be forced to because of the new criteria brought in as a result of Bank of England regulation – and 5 year fixes are indeed at a historical low. I tend to stick to cheaper 2 year products – but you should always get independent financial advice.”
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