One of the biggest obstacles with buy to let mortgages now days is rental ‘stress testing’. Most lenders carry use stress testing to establish a minimum required rental figure. Rental income must satisfy the stress for them to even consider a buy to let mortgage application. In a lot of cases these stress tests make it impossible to get a remortgage on a property that the banks would have previously had no issues with. This can be particularly problematic if you already have a buy to let mortgage and you want to remortgage to a new lender for a lower interest rate. If the rent your property generates is fairly modest in relation to the size of mortgage you have, you could find it rather tricky to get away from your current lender. Mortgage jail!
Earlier this month I had a prime example of exactly this. A client of mine who has a portfolio was looking to remortgage 2 of his properties. The best interest rate his existing lender could offer him was a whopping 5.09%. This was having a severe impact on my clients profit from these properties. The rent his properties command didn’t fit with any lender that stress test rental figures and it looked like he was trapped. Thankfully having a broad understanding of the buy to let lending market meant I knew exactly where to take these cases.
Almost every lender out there handles a BTL application with the same stress testing approach as I mention above. But there are a couple of lenders that don’t work that way and assesses BTL applications on an affordability basis. Something that had previously looked impossible turned out to be a fairly stress free application. I was able to secure the 2 mortgage offers this week. The new deals are 3.09% fixed for 3 years. The financial benefit of this for my client is huge:
Smiles all around
The combined debt of both mortgages is £237,000.
At 5.09% he would have paid £36,189 in interest over the next 3 years.
At 3.09% he will now pay £21,969 over the next 3 years.
These 2 remortgages will save my client around £14,220 in interest payments over the next 3 years. Needless to say he is extremely pleased with the outcome.
If you’d like to discuss your mortgage requirements, no matter how complex you may think the situation is, get in touch and we can have a chat.
Director – Fifty Nine Financial Limited