New PRA rules regarding affordability on BTL loans are set to come in at the start of 2017. This will simply make it more difficult to place BTL cases and some lenders are already tightening the screws in readiness.
The BTL second charge sector enjoys great flexibility at the moment as an alternative to a remortgage or to raise deposits. I strongly recommend you prompt your BTL clients to get any applications in now, rather than wait until the New Year.
Below are some recent examples of complex BTL second charge cases we have dealt with.
Client was living and working in Australia with a BTL property in this country but with little credit history in the UK. Mortgage is interest only and looking to raise further interest only funds to purchase another property in Australia. The broker couldn’t arrange another interest only mortgage. Promise completed an interest only second charge relying solely on the rental income for affordability.
Previous tenants left the BTL property in an uninhabitable condition and ripped out the kitchen and bathroom so no remortgage available. Funds were required to carry out the work and re-let but the landlord was relatively inexperienced with limited additional provable income and a chequered credit history. Promise completed a short term second charge bridging loan to complete the works with a second charge exit after a couple of months working off the proposed rental income.
Client looking to increase his BTL portfolio but had no deposit so needed to take some equity out of the BTL properties. However he was tied in to the existing mortgages with high ERC’s. Promise raised the deposit by second charges on multiple BTL properties which allowed the introducing broker to arrange the BTL mortgages.
Client wanted to raise money for consolidation purposes secured against a BTL but the rental income didn’t cover the mortgage payment and there was some adverse credit in the background. Promise raised the full amount required by choosing a second charge lender which assessed affordability taking into account both the rental and earned income.
With BTL rates starting at 5.49% our second charge lenders provide great flexibility around property type, construction as well as the client profile re age, income types etc.
If you are struggling to place complex BTL cases call Promise ASAP. As we approach the New Year we expect it to get more difficult.
2 out of 3 borrowers get a lower rate than our representative example of a regulated secured loan below:
Mortgages and Remortgages
£80,000 over 240 months at an APRC OF 4.3% and a discounted variable annual interest rate for two years of 2.12% at £408.99 per month followed by 36 payments of £475.59 and 180 payments of £509.44. The total charge for credit is £39,873 which includes a £995 broker / processing fee and £125 application fee. Total repayable £119,873.
Secured / Second Charge Loans
£63,000 over 228 months at an APRC OF 6.1% and an annual interest rate of 5.39% (Fixed for five years – variable thereafter) would be £463.09 per month, total charge for credit is £42,584.52 which includes a £2,690 broker / processing fee. Total repayable £105,584.52.
£4,000 over 36 months at an APR OF 49.9% (fixed) and an annual interest rate of 49.9% would be £216.21, total charge for credit is £3,783.56. Total repayable £7,783.56.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME
REPAYING YOUR DEBTS OVER A LONGER PERIOD CAN REDUCE YOUR PAYMENTS BUT COULD INCREASE THE TOTAL INTEREST YOU PAY. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
If you have been introduced to Promise Money by a third party / affiliate, Promise may pay them a share of any fees or commission it earns. Written terms available on request. Loans are subject to affordability status and available to UK residents aged 18 or over. Promise Money is a trading style of Promise Solutions Ltd. Promise Solutions is a broker offering products which represent the whole of the specialist second mortgage market and is authorised and regulated by the Financial Conduct Authority – Number 681423.
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