All of the lender’s BTL core products have a rental calculation of 125% of the pay rate or (if there is one) the reversion rate whichever is the higher. The lifetime tracker has no reversion rate therefore properties with a rental yield of just 3.23% - 3.74% will pass the rental calculation test.
Many properties in the South East and especially prime central London have a relatively low rental yield when compared to regional properties and fall foul of lender rental calculation tests, which typically are based on 125% coverage of a nominal 5% pay rate. Whilst this product has no geographic restrictions, the minimum loan size of £250,000 is likely to favour properties in the South East where capital appreciation has been the strongest.
The 75% LTV product has a pay rate of 3.99% (Libor plus 3.46% for life) and the 70% LTV product has a pay rate of 3.69% (Libor plus 3.16% for life), both carry an arrangement fee of 3% which can be added to the loan.
Alan Cleary, Managing Director of Precise Mortgages commented:
“I was recently in a meeting with a London based mortgage broker who told me that they were having problems placing their BTL business due to the lower rental yields in London. Two and three year deals are not always the right solution especially where the reversion rate is significantly higher than the initial pay rate and I am hoping this product helps to solve the problem.”
Alex King, Executive Director of SPF Private Clients, added:
“The buy-to-let sector is expanding rapidly as investors seek better returns than those available via cash or stocks and shares. However, one issue landlords face is tight rental calculations, making it tricky to purchase investments such as lower-yielding London properties. Precise Mortgages’ new rental calculation of 125% of pay rate is therefore extremely welcome and likely to be popular with landlords, enabling them to gear up to 70 or 75% LTV.”
