5 buy to let mortgages with generous rent to interest calculations

Buy to let mortgages with generous Rent to Interest calculations are disappearing fast. Come 1 January 2017 lenders will be required to RTIs for landlords borrowing personally. Jeni explains why and reveals some buy to let mortgages rates which have a more generous cover ratio.

Lately, we have reported widely on the forthcoming changes to buy to let underwriting as set out by the Prudential Regulation Authority.

In particular, Rent to Interest (RTI) calculations and stress tests will become much tougher as lenders are obliged to take into account future Income Tax changes for personal borrowers (as well as interest rates and other measures of affordability).

For years the industry standard RTI has been 125% at pay rate or 5% but going forward we will see at least 145% at 5.5%. 

Some lenders have already made the changes required by the PRA but there are some that haven't which means that there are still some rates available where the RTI is more generous - the most extreme version of this currently being 125% at 2.59%.

Below are some of the deals which we believe offer both a flexible calculation and a good rate.

I would also just point out at this stage, that those looking for a buy to let mortgage using a limited company will not be affected so harshly by the PRA changes because companies are subject to Corporate Tax not Income Tax.

For any extra information on the rates below do give us a call on the main line 0345 345 6788.

 

Term and rate

APR

LTV

Fee*

ERCs

RTI

3.18% 5 Year Fixed*

Reverting to lender’s Standard Variable Rate - 1% (SVR currently 4.73%, variable).

>> NO LONGER AVAILABLE  

3.8%

70%

1.5%

Yes

125% @ 3.73%

3.99% 10 Year Fixed**

Reverting to lender’s LIBOR + 3.62% (LIBOR currently 0.38%, variable).

>> NO LONGER AVAILABLE  

4.2%

75%

1.5%

Yes

125% @ 4%

2.69% 3 Year Fixed***

Reverting to lender’s Standard Variable Rate (SVR currently 4.49%, variable).  

>> GET A QUOTE INSTANTLY

4.3%

60%

£995

Yes

125% @ 4.5%

3.99% term tracker**** 

Lender’s LIBOR + 3.6% for loan term (LIBOR currently 0.39%, variable).

>> NO LONGER AVAILABLE 

4.2%

75%

1%

Yes

125% @ 3.99%

3.85% 5 Year Fixed*****

Reverting to lender’s LIBOR + 4.75% (LIBOR currently 0.40%, variable).

>> NO LONGER AVAILABLE  

5%

80%

£2,495

Yes

125% @ 4%

 

You may also like to read:

Four or more rental properties? How the changes to underwriting standards will affect you…
Gavin Elley, looks at why landlords with four or more rental properties are being singled out in the PRAs consultancy paper on buy to let underwriting standards and what this means for you.

How the new buy to let underwriting standards will affect lenders and borrowers 
Steve gives his views on what the implications of tougher interest cover ratios and increased background checks will mean for landlords and buy to let lenders.

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*Fixed at 3.18% for 5 years reverting to lender’s Standard Variable Rate – 1.00% (SVR currently 4.73%, variable). For purchases and remortgages. Early Repayment Charge: 5% of the amount being repaid for the first year, then 4.5% until the end of year 2, then 4% until the end of year 3, then 3.5% until the end of year 5 from drawdown (overpayments of up to £5,000 can be made in any 12 month period without incurring an early repayment charge). Overall Cost for Comparison: 3.8% APR. Loan to Value: 70% loan to value up to £1,000,000 loan amount. Lender Arrangement Fee: 1.5% added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the cost calculated at a rate of 3.73%. Minimum Income Required: No requirement.

 

**Fixed at 3.99% for 10 years reverting to lender’s LIBOR + 3.62% (LIBOR currently 0.38%, variable). For purchases and remortgages. Early Repayment Charge:5% of the amount being repaid until 31/10/2017, then 4% until 31/07/2018, then 3% until 31/10/2019, then 2% until 31/10/2020, then 1% until 31/10/2026. Overall Cost for Comparison: 4.2% APR. Loan to Value: 75% loan to value up to £750,000 loan amount. 70% loan to value up to £1,000,000 loan amount. Lender Arrangement Fee: 1.5% added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the cost calculated at a rate of 4%. Minimum Income Required: No requirement.

 

***Fixed at 2.69% for 3 years reverting to lenders Standard Variable Rate (SVR currently 4.49%, variable). For purchases and remortgages. Early Repayment Charge: 3% of the amount being repaid for the first year, then 2% until the end of year 2, then 1% until the end of year 3, from drawdown. Overall Cost for Comparison: 4.3% APR. Loan to Value: 60% loan to value up to £1,500,000 loan amount. 50% loan to value up to £3,000,000 loan amount. Lender Arrangement Fee: £995 added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the cost calculated at a rate of 4.5%. Minimum Income Required: £25,000 per annum.

 

**** Term tracker at 3.99% = lender’s LIBOR + 3.6% for loan term(LIBOR currently 0.39%, variable). For purchases and remortgages. Early Repayment Charge: 3% of the amount being repaid for the first 3 years from drawdown. Overall Cost for Comparison: 4.2% APR. Loan to Value: 75% loan to value up to £1,000,000 loan amount. Lender Arrangement Fee: 1% added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the cost calculated at a rate of 3.99%. Minimum Income Required: £25,000 per annum.

 

*****Fixed at 3.85% for 5 years reverting to lender’s LIBOR + 4.75% (LIBOR currently 0.40%, variable). For purchases and remortgages. Early Repayment Charge: 5% of the amount being repaid until 31/10/2019, then 4% until 31/03/2021, then 3% until 31/03/2022 from drawdown. Overall Cost for Comparison: 5% APR. Loan to Value: 80% loan to value up to £500,000 loan amount. Lender Arrangement Fee: £2,495 added to loan. Broker Fee: A broker fee of £497 will apply (other fee options available). Repayment Options: Interest only or repayment. Rent to Interest Cover: The rental income must exceed 125% of the cost calculated at a rate of 4%. Minimum Income Required: £25,000 per annum.

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