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BTL

5-Year Fixed Rate BTL Mortgage with a 2-Year Early Repayment Charge

In today’s fluctuating Buy to Let mortgage market, finding the right deal for you can be challenging.

One option worth considering for BTL properties owned personally is the 5-Year Fixed Rate BTL Mortgage with a 2-Year Early Repayment Charge (ERC), specifically designed to offer both stability and flexibility.

Number 5

Here’s a closer look at this product and how it may benefit you.

Key Features of the 5-Year Fixed Rate Mortgage

  • Fixed Rate for 5 Years

With this mortgage, you will enjoy the peace of mind that comes with a fixed interest rate for five years. This means predictable monthly payments, making budgeting easier.

  • 2-Year Early Repayment Charge

It only has a 2-Year Early Repayment Charge compared to a traditional BTL mortgage which is usually 5 years. After this period, you can remortgage or switch to another product without incurring any fees. This flexibility allows you to take advantage of lower interest rates if market conditions change.

  • Maximise the amount of borrowing

If you wanted a two year fixed rate the stress test calculation is much harsher and on low yielding properties it is sometimes difficult to get 75% loan to value. With this product as it is for five years, it has a more lenient stress test based on the interest rate you pay rather than the rate +2%, which is common for most lenders.


Who Might Benefit from this?

Ideal Candidates:

  • Personal Ownership Only: It is available for property investors who own up to 10 properties if you want to raise additional finance on this mortgage. If it’s just a balance swap there is no limit on the number of BTL properties owned.
  • Those Seeking Stability with Flexibility: This mortgage is a great fit for property investors who want the security of a 5-Year Fixed Rate but also wish to have the option to switch after two years without incurring penalties if interest rates drop.
  • Clients Considering Shorter Fixed Rates: Customers who are contemplating a 2-Year Fixed Rate mortgage might find this option appealing as it provides an extended three-year fixed rate at the initial terms  and potentially greater borrowing.

Who Might Not Find This Product Suitable?

Less Ideal Candidates:

  • Limited Company: Sorry, only available for personal ownership.
  • Clients Confident in Stable Rates: If you believe that interest rates will not drop in the next two years, you  may prefer a standard 5-Year Fixed Rate mortgage without the early repayment charge.
  • Those Certain Rates Will Decrease: Customers who are convinced that mortgage rates will be lower in two years may not see the value in paying a premium for the option to switch. They might opt for a straightforward 2-Year Fixed Rate mortgage instead.

Conclusion

The 5-Year Fixed Rate Mortgage with a 2-Year Early Repayment Charge is designed to cater to a specific market segment looking for a blend of security and flexibility.

If you are considering this option or want to learn more about how it fits feel free to reach out.

Recognise agrees £1.16m loan for complex multi-property portfolio deal

Rental portfolio acquired through company purchase.

Recognise Bank has financed the complex purchase of a portfolio of mixed buy-to-let properties with a £1.16 million Professional Buy-to-Let (PBTL) loan, after the borrower had been let down by a number of other lenders.

The properties on a housing development in Worksop, Nottinghamshire, were owned by a limited company. Rather than buying the properties directly, Recognise supported the borrower in acquiring the company, and thus ownership of the rental portfolio. This saved the client a six figure sum in Stamp Duty Land Tax.

Broker Simon Allen of Searchlight Finance brought the case to the Bank after being frustrated at the struggle to find a suitable lender. Even though the borrower, Kevin McDonnell, is well-known in the UK property industry for structuring similar creative deals, Simon found that many lenders still would not look at the deal because of its complexity.

Simon worked closely with Ian Fields, Relationship Manager at Recognise Bank, who helped shape the deal, a fixed rate loan using the PBTL product, which is specifically designed for property investors and landlords with multi-property portfolios.

In the transaction, the existing company directors and shareholders exited the limited entity and the Bank’s clients stepped into their positions. The process involved several sets of solicitors and a higher level of due diligence compared with a standard PBTL deal.

Ian Fields, Relationship Manager at Recognise Bank, commented: “Many of our competitors would not know how to undertake this type of purchase because it is so complex.

“However, at Recognise Bank, our business development managers and loan management teams are some of the most experienced property lenders in the industry and we understood the challenge, what would be required, the steps we needed to take to ensure we could progress the deal, and which professional partners we needed to work with to ensure the deal could be completed.”

Simon Allen of Searchlight Finance added: “Large loans are our bread and butter, and whilst it was a complex deal for some, we knew the transaction could be done due to our experience dealing with property investors. Recognise were a joy to deal with and were positive all the way through the process.”

Source – Recognise Bank Press Release

Successful Completion: Mortgage Secured for Multi Unit in Croydon

Helping Property Investors Achieve Their Goals

🌟 Mortgage Completed for Portfolio Landlord

We’re pleased to announce the successful completion of a Buy To Let Multi Unit Freehold Block for an existing Portfolio Landlord in Croydon. This deal is another example of how we support property investors to grow their portfolios.

📍 Property Details:

-Type of Property: Multi Unit of four units with eight bedrooms with a commercial valuation
-Location: Croydon
-Value: £1,100,000
-Loan-to-Value (LTV): 75%
-Mortgage Type: Interest Only for 35 years

🏦 Issues to Overcome

Damp in the cellar. Many lenders would get their valuers to decline the property if any type of retention is required.

Whilst the valuation recommended works that would cost £10,000 when the specialist reports came in £40,000 was quoted.

Working with the client we negotiated with the lender that most of the works weren’t required to make the property mortgageable and to rectify the initial damp identified which saved the client £30,000.

 

Successful Completion: Mortgage Secured for Multi Unit in Kent

Helping Property Investors Achieve Their Goals

🌟 Mortgage Completed for Portfolio Landlord

We’re pleased to announce the successful completion of a new build Buy To Let Multi Unit Freehold Block for an existing Portfolio Landlord in Kent. This deal is another example of how we support property investors to grow their portfolios.

📍 Property Details:

-Type of Property: Multi Unit of seven units with twelve bedrooms
-Location: Kent
-Value: £1,500,000
-Loan-to-Value (LTV): 50%
-Mortgage Type: Interest Only for 30 years

🏦 Issues to Overcome

The lender we selected had a maximum number of six units for their product which had a fixed fee which is rare as most are percentage based.

We discussed the case with both the sales team and underwriters prior to submission and asked if they would make an exception to their policy which they agreed.

This saved the client approximately £28,000 over the five period of the product compared to the next option.

 

BTL tracker mortgage with flexibility built in.

Always good to see new products come out especially when they give our property investor clients flexibility.

It’s a two year tracker mortgage and within the two years you can:

– Sell the property
– Lock into a fixed rate with the lender

No early repayment charges on either option.

This will appeal to property investors and developers who are happy to tenant new developments, before selling as well as giving existing investors the ability to track, fix or even sell during the initial term.

Available from today as a limited-edition, two-year discounted tracker across buy-to-let and semi-commercial.

Available for:

  • HMOs (no maximum number of rooms)
  • MUFBs (no maximum number of units)
  • Short-term, holiday and Airbnb lets
  • Serviced accommodation
  • DSS, vulnerable tenants
  • Asylum Seeker
BTL Mortgages

How to Choose the Right One for Your Property Portfolio

Finding a buy to let mortgage can seem like a daunting process, but with the right advice and guidance you can get the BTL mortgage you need. Here are some tips on how to get started:

Do your research

Before you start anything, make sure you have done your research. There are a lot of different buy to let mortgages available, so it’s important to find the one that’s right for you.

Get pre-approved

Before you go ahead and apply for a buy to let mortgage, it’s important to get pre-approved by a BTL mortgage broker. This way, you know you’re eligible for a mortgage.

Talk to a mortgage broker

A good broker who does BTL every day should be interested in your plans and future strategy. They will be able to help you understand the process and find the right mortgage for you.

Compare rates and costs

Once you’ve decided on a mortgage, it’s important to compare rates and all the costs as it’s not just about the headline rate.

There are a lot of different lenders out there and most are only available to mortgage brokers, so it’s important to find one that’s right for you and the property.

Get a mortgage

Once you’ve decided on a lender and have your documents ready, it’s time to get a mortgage. Make sure you have all the documents your broker has requested and be prepared to answer any questions the mortgage provider may have.

Finding a buy to let mortgage can be a daunting process, but with the tips outlined in this article, you should get the mortgage you need.

If you have any questions or would like help with finding a buy to let mortgage, please contact us.

Where have the BTL Mortgages gone?

If you’re looking for a BTL mortgage and want to fix your mortgage rate then think again. You may have to wait as the majority of lenders have removed their fixed rate products.

Nearly 40 lenders have done this this week due to the uncertainty in the market.

We’ve been here before during Covid and the last credit crunch but this seems different. When you have had something for so long it becomes the new norm. Historic five year fixes of 2% for personal investors and 3% in the limited company space now seem an eternity away.

We won’t be going back to that so now is the time to evaluate your property portfolio to see what options you have.

We expect lenders to gradually return to the BTL market once they become more confident, but rates will be higher.

Over that last few months the 4% and 5% barriers have been breached. in the limited company market we’re now looking at 6%-7% rates!

We arrange BTL mortgages every day and have been here before and as landlords ourselves we are facing the same issues as you.

If you want advice then please get in touch.

EPC Rating: How Important is it When Buying?

We see many purchasers of BTL property unaware of the proposed EPC changes .

Background to Changes

The government proposed in December 2020 that all rental properties must have an EPC rating of ‘C’ or above by 2025. All tenancies will have to comply with this regulation by 2028.

Renting out a property with an EPC rating lower than a ‘C’ will be illegal if the proposal becomes law.

What can you do

If landlords take out a BTL Mortgage on a five-year fix and need to sell the property, they may incur an early repayment penalty.

Additionally, they should consider the cost of making the necessary changes to reach the required standard if they decide to keep the property.

If you look at the EPC report it will make suggestions to improve the rating. For instance, they can switch to LED light bulbs, which are more energy-efficient and eco-friendly.

Other techniques include installing double-glazed windows, smart meters, energy-efficient boilers, wall and roof insulation.

It is advisable to talk to an EPC assessor to discuss what can be done and the potential costs involved.

Furthermore, landlords can look up their neighbours’ EPC ratings to see how they achieved a ‘C’ rating.

Although the deadline for compliance is still a few years away, landlords have an incentive to start the work early due to the shortage of skilled labour in the market.

Mortgage Implications

Landlords should also consider their exit strategies and remortgage with green BTL mortgages that offer lower rates or fees to those with energy-efficient properties.

If you need help arranging your BTL Mortgage, please contact us.

Don’t just focus on the interest rate

Would you go back to this restaurant?

-The food is usually late

-Sometimes they bring out the wrong meal

-The waiting staff ignore you

-You wait an hour to be served

-They tell you the wrong ingredients in a meal

-Their service is slow

-The front of house is very pleasant and is always telling you about the quality of the cooking and service. But reality is different, and they get ignored by the chefs.

-They care more about touting for awards than service

-The restaurant owner is aware of all this but doesn’t do much to change this

I presume the answer is no, so why are some BTL mortgage lenders like this?

Thankfully there are plenty that are the opposite so you can still get a great meal.

Next time you’re looking for bridging finance or a BTL mortgage ask about the service, as price isn’t everything.

Update your EPC after a refurbishment

A plea to Property Developers.

You’ve spent thousands on a refurbishment and are now looking to refinance onto a BTL mortgage to get your money back. Why not spend extra on getting a new EPC once you’re finished your project?

Most property developers who come to us for a BTL mortgage to repay their bridging loan have the EPC which was issued when they bought the property. If it’s a D or E these are acceptable to lenders, but some are still F or G which aren’t acceptable to any long term BTL lender.

Nobody has mentioned this to them before. It’s criminal, as a good bridging broker should, because it influences which lender is going to repay the project.

To get a new EPC can delay the repayment of the bridge. One recently has cost the client an extra three weeks interest. It doesn’t sound much, but that £1,300 is now in the lenders pocket rather than the clients.

If the EPC is C then many lenders offer lower interest rates so less to pay each month, increased profits and cash-flow.

Don’t delay, EPC today.

Another 80% LTV product for Buy to Let Landlords

It’s good to the see one of our lenders return to 80% LTV on single lets. They have two and five year fixed products for BTL mortgages which come either with a free or discounted valuation.

Available for personal and limited company ownership. Portfolio landlords welcome.

Tenants working, students and DSS on AST. Corporate Lets and Local Authority & Housing Association Lets (prior approval required).

They also finance HMOs and multi unit blocks and products available at both 65% and 75% LTV.

To find out more about this product and our services please contact us.

advice lettering text on black background

ILA – The Hidden Costs of a Guarantee

When taking out a BTL mortgage 99% of lenders require the directors and possibly shareholders to personally guarantee the mortgage.

This guarantee needs witnessing from a solicitor who must explain the legal implications of the document. This is called Independent Legal Advice (ILA).

A lot of brokers do not mention this process so when it comes to signing in front of a solicitor there can be a big surprise. We have seen some fees as high as £800 to witness one document!

There can be a choice though as lenders fall into these categories:

  • ILA always required
  • ILA can be dispensed with under certain circumstances. Usually when the guarantors are the same as the directors
  • The guarantee can be witnessed by anybody over the age of 18 who is not related to you or on the same loan
  • No Guarantee required

As we move down the list the cost to witness the guarantee reduces to zero and the process is much quicker.

Make sure you are fully aware of the options and costs as there can be significant savings with the right lender.

We always discuss this as part of the legal process. If you require help getting your next Limited Company BTL mortgage please contact us.

Portfolio Landlords – BTL Remortgage

As a professional landlord it’s not just about the rate when choosing a BTL remortgage, it’s also speed if you are approaching your current lender’s variable rate. If you have a quick lender and competitive rates you are on your way to a speedy completion for your Buy to Let Remortgage.

These are some of things a lender can do to speed the process up:

  • Title Insurance
  • Electronic Signatures on Application Forms
  • Open Banking
  • Relaxed view on Independent Legal Advice

Ideally the lender should also offer the following:

  • Product Transfers
  • Extensive solicitor panel
  • Ability to repay extra each year

When comparing mortgages always add up all the costs including interest, all lender fees, legal costs and providing Independent Legal Advice for the personal guarantee.

Also look at the information they need and how long will it take you to prepare. The list includes:

  • Portfolio – will it meet the lenders LTV threshold, with most it’s 75% although some are less and others more
  • Rental Calculation across portfolio
  • Business Plan – doesn’t take long and lenders have their own format
  • Cash flow – the longest to do but not many lenders ask for it
  • Bank Statements confirming income on the portfolio
  • Tax Year Calculations, SA100 and Tax Year Overviews for at least two years
  • Limited Company Accounts for at least two years
  • EPC – are they all E or better. If F or G a lender may ignore the income but still include the debt

We’ve been doing this type of mortgage for many years so please contact us if you need help on your next BTL remortgage.

BTL Portfolio Lending

What is BTL portfolio lending and what are the benefits? It’s not to be confused with a portfolio landlord (four or more mortgages). It’s when one lender takes multiple properties on one loan.

Very few lenders can do this and it tends to be the banks, both high street and challenger and a few specialist lenders.

The question I get asked a lot from professional landlords is when should I do this? There is no definitive answer as every portfolio is different.

If you are considering restructuring your portfolio as part of tax planning then review your finances at the same time.

Pros

– You go from a number to having a relationship with a manager who understands property.

-Greater flexibility if a property becomes empty as rental cover calculated across the portfolio.

-Can be lower costs in setting up the loan as reduced valuation fees and legal costs.

-Option for 100% on purchases if there is headroom within the security calculation.

-Low pricing if loan is for 3-5 years increasing cash flow.

-Administration easier as one account as less lenders to deal with.One direct debit for all properties and only one lender discussion at renewal time.

Cons

-Performance Covenants: eg: Minimum LTV, rental cover, net assets.

-Provision of regular information to the lender including accounts, portfolio lists.

-All rents may have to go through the same bank where the loan is and all monies in these current accounts can be used to offset the loan balance if things don’t go to plan.

-Some lenders will only commit for three or five years and then you renegotiate so further valuation fees, set up fees, possible increase in rate. Others will do twenty-five.

-Lenders may require regular valuations on the portfolio which you will pay for.

-Cross default clauses. If you have a problem on one loan it affects all the others with the same lender.

-Consolidation clauses. If you sell a property they may take 100% of proceeds.

-Usually on repayment basis so lose benefit of cash flow if that’s you want.

-Ideally £1m loans + to get the best rates.

-Less brokers to assist you due to the complexity

At Searchlight we have experience in arranging these facilities and we’d be happy to talk you to about your finance requirements. Please contact us by phone or email.

BTL Portfolio Restructure Accountants Advice

Today I have come across one of the worst structures implemented by an accountant for a BTL landlord I have seen. The client owns properties personally and he has been told to put all the rental income through a limited company and then create a deed of trust as part of this process.

Land Registry, his tenants and lenders think he owns them personally, HMRC expect the rent to go through his personal tax return but it’s in the limited company. Finally the deed of trust shows he and the company own the properties 50-50!

As well as being in breach of his mortgage conditions, he can no longer refinance his BTL mortgage portfolio or buy any more property.

What’s worse for the client is the accountant is a family friend, so I envisage many an awkward conversation ahead.

Before you do any restructure I recommend that you talk to a Chartered Tax accountant who understands the property market and once you have options, speak directly to your lender or a broker who understands the BTL market.

You will find out how the lenders view your options and you won’t lose sleep at night because of what your accountant has done.

We know what the lenders like and don’t like, so are happy to help you with your BTL mortgage restructuring plans.

Searchlight Finance Ltd is a broker not a lender.

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We are a credit broker not a lender.

Searchlight Finance Ltd is registered at 98, King Street, Knutsford, Cheshire, WA16 6HQ. Company Register number is 07929050.

Authorised and Regulated by the Financial Conduct Authority. Our FCA registration number is 743220. You can check via www.register.fca.org.

We are registered with the Information Commissioner’s Office, Z3109319 and you can check via www.ico.org.uk.

We conduct both regulated and unregulated business and therefore not all products provided through us are regulated by the Financial Conduct Authority.

We source finance from the whole of market and may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature of any commission model will be confirmed to you before you proceed.

Member of National Association of Commercial Finance Brokers (NACFB).