A client recently approached me for assistance with a residential remortgage. However, as part of my review, I noticed one of the buy to let investments in their portfolio was about to revert onto the lender’s standard variable rate (SVR). As such, I recommended a buy to let refinance to avoid being put onto a higher rate.
Aside from a more attractive rate, the remortgage of the buy to let property would also enable my client to raise capital in order to expand their property portfolio. This is a particularly hot topic at present in light of the changes set out by the Prudential Regulation Authority (PRA), changing the way in which portfolio landlord mortgages are underwritten from September 2017.
The property requiring refinancing was a three-bedroom house in Oxford, worth £450,000.
Whilst working on this case, I came across a number of challenges; firstly, the changes set out by the PRA earlier in the year have impacted high loan to value buy to let lending, with some lenders requiring rental income to cover 145% of the mortgage, rather than 125% coverage previously/historically. This can restrict the amount a landlord can borrow, so a favourably stressed pay rate product was needed.
Secondly, when capital raising, lenders want to know what the funds are for – for example, home improvements, purchasing another property, debt consolidation, etc. In the cases where the client is buying another property, the lender will often ask for proof of the onward purchase. Where portfolio landlords are concerned, they may not have the new property lined up, but want to be ready to move quickly when they see something, so this can be an obstacle.
I knew of a lender who offered extremely attractive rates and who would be comfortable with capital raising for the purpose of portfolio expansion, but – because of their competitive rates – their service times were longer than desirable. However, thanks to my excellent relationship with the business development manager, I was able to get this case prioritised.
I was able to secure my client a buy to let refinance at 75% loan to value, at a rate of 3.79% fixed over five years, on a 27-year term.
In addition to assisting my client with their mortgage requirements, I was also able to put them in touch with a solicitor who I knew would make the process as efficient as possible. An example of how Enness can help at all stages of the mortgage process.