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  • loanarranger
    replied
    Paragon Rental Stress Calculations

    Paragon Mortgages have announced the following rental stress calculations , please note the stress calculations which apply to their Special Edition Products.

    I do not endorse this lender but merely state the rental calculations in order that readers are aware of the varying rates which apply depending on the types of property/Incentive products etc.






    INTEREST COVERAGE RATIO







    For single self contained properties (individuals), the rental calculation is

    125% @ 5.35% or charging rate if greater.

    For single self contained properties (Limited companies), the rental calculation is

    125% @ 5% or charging rate if greater.

    For all HMO and Multi unit properties, the rental calculation is

    130% @ 7% or charging rate if greater.

    Limited Edition Products:

    For all single self contained properties, the rental calculation is

    125% @ 4% or charging rate if greater.

    For all HMO and Multi unit properties, the rental calculation is

    130% @ 4% or charging rate if greater.


    ANY QUESTIONS?
    the £150 application fee must be paid at the time of the online application submission.

    Leave a comment:


  • loanarranger
    replied
    Hi JayDavys
    I agree with your observations , maxing on the equity upto 75% is proving a challenge; today I did a portfolio analysis for a client and whilst there were funding opportunities using lower stress ages it was at the sacrifice of getting a lower rate of interest , in this case there was a lifetime tracker rate in the mid 3% range and which carried a rental stress of 125% at the paid rate.

    The main lenders are quietly twisting the screw and consequently I agree that if one wants to release equity this is the best time to do it before stress rates and other affordability factors kickin during 2017.

    Leave a comment:


  • JayDavys
    replied
    Very interesting and very helpful loanarranger.... looks like I'd better pull funds out of my unencumbered btl sooner than later. Basing it on 5.5% (rather than the current 4.99%) and the 145% TMW now use I won't even be able to get up to 65% LTV as I'd previously planned... more like 55%-60% at best. This really hits higher end properties hard. Mine is a 3 bed ex-council flat worth circa £240,000 and renting for £900-950. The stress tests even at this level make 75% equity release a pipe dream.

    Leave a comment:


  • loanarranger
    replied
    Buy to Let Underwriting set for a Shakeup

    I would like to share an article which was issued as a briefing note from the Legal & General Mortgage Club to its members. I know I have been harping on about the imminent changes but this finally puts into context the implications for investors going forward.

    If you have any questions please let me know or speak with your own broker.

    " 03 October 2016
    The Prudential Regulation Authority (PRA) have agreed on a phased implementation process for the new BTL affordability assessment.

    In their supervisory statement issued this week, lenders will be required to implement the changes to interest coverage ratio tests and interest rate stress tests by 01 January 2017, with the remainder of the required changes by 30 September 2017.

    All lenders will be required to use an interest coverage ratio and/or an income affordability test (taking into account the borrowers personal income to support the mortgage payment, Wealth can also be included as a measure in this) when assessing a buy to let application.

    Borrower costs that will be taken into account by lenders include: management and letting fees, council tax, service charge, insurance, repairs, voids, utilities, gas and electrical certificates, licence fee, ground rent and any other costs associated with renting out the property.

    A minimum borrower interest rate of 5.5% must be used during the first five years of the buy to let mortgage.

    Pound-for-pound remortgaging landlords will not be subject to the rules. There are also some other exclusions including Consumer Buy to Let, Buy to Let mortgage contracts with less than 12 months and consent to let where an owner occupier on a residential mortgage applies to let their property temporarily.

    Portfolio Landlords with 4 or more mortgages buy to let properties will be subject to specialist underwriting standards.

    Lenders are prevented from using the SME supporting factor when conducting buy-to-let business.

    Some lenders have already made changes to their BTL calculations. To help you understand what lenders are currently offering we have produced a Matrix which will be updated over the coming months.

    So what does this actually mean to your BTL customers?

    Take a look at the example below.

    Based on the National Average BTL Loan Size of £150K (CML Jul16)

    How to work out the amount of Rental income that is required:

    Loan amount (£) /12 x min borrower interest rate (%) x min ICR threshold (%)

    E.g. £150,000/12 = £12,500 x 5% = £625.00 x 125% = £781.25 monthly rental required

    The table below shows the difference in the monthly rental income required, applying the increased interest cover.
    LOAN AMOUNT MIN BORROWER INTEREST RATE MIN ICR THRESHOLD MONTHLY RENTAL INCOME REQUIRED
    £150,000 5% 125% £781.25
    £150,000 5.5% 125% £859.37
    £150,000 5.5% 125% £996.87

    The above example does not include additional personal income.
    Cautionary note:
    Although the rental income should exceed the monthly interest only mortgage payments there are obviously going to be further costs over and above the deposit required such as maintenance, insurance, void periods, letting costs etc.

    Leave a comment:


  • loanarranger
    replied
    Nationwide makes significant changes to assessment of rental income in determining affordability for Home Owner Mortgages

    Whilst slightly off topic I thought I would share with you news about how the Nationwide change in rental assessment could impact on how much one could borrow for either a remortgage or homeowner mortgage.

    With immediate effect where an applicant has rental property Nationwide will check to see if the level of rent equals or exceeds 145% of the monthly mortgage payments, should that prove not to be the case the amount of shortfall will be used as an additional outgoings in order to determine the maximum loan which they would grant.

    As I have mentioned in previous postings changes in mortgage assessments particularly for Buy to Let but it seems a fair understanding that the applied level of caution could spill over and involve other lenders and particularly where applicants have Buy to Let properties in the background.

    Leave a comment:


  • loanarranger
    replied
    As a Gamekeeper turned poacher I am very aware of the practices of lenders; with mortgage rates coming down, lenders are in my considered opinion being greedy and charging such completion fees as are being seen.1% is amongst the lowest with many still charging between 1.5% and 2%, unfortunately very few operate a flat/ fixed fee which can make the product offering slightly more palatable.

    Leave a comment:


  • Claymore
    replied
    Nice to see there is a lender willing to take this risk. It's a shame their arrangement fee, based on a minimum of £200,000, is a bit expensive.

    Leave a comment:


  • loanarranger
    replied
    A new facility to accommodate property to be let to an immediate member of the family

    I am not endorsing this lender but in view of the recent postings where property has been or needs to be let to an immediate member of the family and do not wish to break mortgage terms for such types I am detailing the following facility from the Market Harborough Building Society. To the best of my knowledge they deal almost exclusively through the intermediary market.

    Designed for applicants wishing to let to a close relative (i.e. spouse or civil partner, children, parents, brothers and sisters) or a borrower that intends to occupy the property at a future date.

    Pay rate 3.99% term discount with a maximum Loan-to-Value of 70%
    • Minimum loan £200,000
    • Maximum loan £1,500,000
    • Early Repayment Charge - 3% for 2years
    • Arrangement Fee - 1% of the loan amount
    • Rental income 125%, based on the pay rate

    Leave a comment:


  • loanarranger
    replied
    Chestertons raise a query as to whether the new Chancellor will make changes to the proposed tax increases

    Philip Hammond, Theresa May’s new Chancellor, should follow the Bank of England’s lead and act to shore up house prices and keep sales markets moving by slashing or temporarily suspending stamp duty.
    The Bank’s Governor Mark Carney has already lifted capital requirement restrictions on British banks in the wake of last month’s Brexit vote. The Monetary Policy Committee (MPC) may also cut interest rates to encourage growth and investment, so the onus is now on the Chancellor to follow suit, and property experts hope steps could be taken to ease “punishing” property taxation, by reducing the rate or offering a stamp duty “holiday” to incentivise buyers and investors and bolster confidence.
    Guy Gittins, Sales Director at Chestertons, says: “Our new Chancellor says he wants ‘rising prosperity for the great bulk of people in the UK’, but this will not be possible if home ownership remains an unaffordable dream for many, or if the sales market stalls and houses slip backwards, as RICS recently forecast looks likely to happen, especially in London.
    Gittins adds: “Mark Carney’s recent announcements contained good news for homeowners and buyers alike. By easing mortgage liquidity he is trying to keep the house market moving and prevent prices slumping. The MPC cutting the base rate of interest would also be a welcome move for mortgaged buyers and owners, and by reducing or temporarily removing punishingly high stamp duty the new Chancellor can ensure the housing market isn’t going to ‘seize up’, while at the same time making ownership more affordable for buyers, particularly in London.”
    Chestertons’ Head of Research Nick Barnes comments: “The past few Budget announcements have seen stamp duty changes that were supposed to ‘level the playing field’ by pricing out buy-to-let landlords and overseas investors. In reality the changes were little more than a series of heavy-handed attempt to cool the market, and the consequences were in fact the exact opposite of what was intended. Overseas buyers are in a strong position thanks to the cheap pound, while buy-to-let landlords snapped up homes in the most popular locations to beat April’s 3% stamp duty surcharge.
    Barnes continues: “In the post-Brexit environment the housing market mustn’t be allowed to stall and it’s clear Mr Carney recognises this. The ball is now in the Chancellor’s court and an overhaul of stamp duty must be a top priority. He should also scrap the planned withdrawal of landlords’ mortgage interest tax relief. Mr Carney sees the danger posed by buy-to-let landlords ‘abandoning’ the market; it’s to be hoped the new Chancellor will also recognise this and act accordingly.”

    Read more at http://www.chestertons.com/research-...Q2jUBfMj9xY.99

    Leave a comment:


  • loanarranger
    replied
    Godiva (Coventry) Increases Rental Stress Rates

    Godiva Mortgages have joined the growing band of lenders in increasing the rental stress calculation based on either the pay rate or reference pay rate whichever is the higher.

    "Our rental calculation will increase from 125% to 140% of the monthly mortgage interest payment and will be calculated using the reference rate or product pay rate, whichever is higher. Our reference rates remain unchanged at 5.5%

    Leave a comment:


  • loanarranger
    replied
    Lenders increase rental stress calculations

    Today TSB has joined with Newcastle BS and Foundation Homeloans in announcing an increase in the rental stress calculation from 125% to 145% against either a notional rate or the SVR .

    Having spent an age playing around with the new formulae it is clear that applicants are going to find that the amount to be borrowed could be way below that which was expected.

    I will keep you posted on subsequent changes.

    Leave a comment:


  • loanarranger
    replied
    Lenders withdrawing Buy to Let Mortgage Products in a hurry

    Today has seen a number of main stream lenders giving notice of immediate withdrawal of Buy to Let mortgage products along with a couple on the residential HomeLoan front.

    I am not sure if this is a knee jerk reaction to the significant changes in money market rates going forward for the next three to six months but clearly the overnight decision by the electorate has cast hopefully a temporary cloud over funding of buy to let investments and these include corporate borrowings.

    As an adjunct to the above I have had telephone calls from agents asking if I am still in the market for buying property to which I have replied not for the present and only when market sentiment has calmed , surprisingly the canvassers indicated that this was a sentiment being expressed by many of the investors they are contacting.

    Time for the G&T to calm the furrowed brow.

    Leave a comment:


  • loanarranger
    replied
    Metro Bank Improves Criteria

    In common with other lenders in increasing the level of mortgage business, they have this morning made the following criteria changes:-
    1) Rental Income Stress Calculation 125%@ 5.5%
    2) Metro will allow borrowings with to a maximum of 10 properties and an overall exposure of 15
    3)In the event of a shortfall on the rental stress calculation they will consider "Top Slicing" from earned income to support the loan requirement.

    I am not endorsing Metro Bank in any capacity other than to highlight changes which certain lenders believe will aid the increase in new BtL business.

    Leave a comment:


  • loanarranger
    replied
    I am posting an article which has appeared in a Mortgage Broking Trade Magazine today the contents of which confirms the initial concerns following the SDLT and the proposed changes in the tax regime for BtL.


    BoE: mortgage lending sees £7bn monthly drop
    By Rozi Jones 1st June 2016
    Mortgages
    BoE: mortgage lending sees £7bn monthly drop
    As this was no surprise, especially given the extra lending on buy-to-let in March, our focus must now turn to the future of the market.
    Mortgage lending increased by £0.3 billion in April - a sharp drop from the £7.4 billion increase seen in March and the lowest figure seen since August 2012.

    The latest Bank of England Money and Credit report shows that gross lending secured on dwellings fell from £27.4 billion in March to £19.2 billion.

    Total lending to individuals increased by £1.6 billion in April, compared to £9.3 billion in March and a six month average of £5.7 billion. This is the lowest figure seen since May 2013.

    More : BoE: lending increases by £9.3bn in March
    However mortgage approvals remained more stable - reaching 66,250 in April, a slight drop from 71,357 last month and a 71,075 average.

    The number of approvals for remortgaging was 40,510, broadly in line with the average over the previous six months

    Leave a comment:


  • loanarranger
    replied
    Lenders prepared to accept remortgage applications immediately after Initial Purchase

    I thought I would update information governing the remortgage of property immediately after purchase given that a number of individuals acquired property pre April 1 by using either personal cash resources or short term property finance in order to avoid the 3% additional SDLT.

    Current there are at least 9 lenders who will consider "Day1" remortgage applications, however it is important to note that such loans will be based against the original purchase price and not immediately designed to enable the release of an EquityProfit that may have been acquired in the purchase; having said that if a property was acquired and substantial ( Not cosmetic) works undertaken for which appropriate invoices can be provided there may be opportunities in a minority of such lenders to consider a release of enhance capital value , the remains lenders might however require the property to have been owned for at least six months. The lenders in question are:-
    Aldermore
    Axis Bank
    Fleet Mortgages
    Foundation Home Loans
    Kent Reliance
    Keystone Property Finance
    Mortgage Trust/ Paragon Mortgages
    Shawbrook
    Virgin Money

    Hope the above helps forum members who either are seeking such types of refinance or contemplating buying at auction.

    Leave a comment:

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