Buy to let mortgages with no ERCs

Think you might want to pay off your mortgage early, but don’t want to be stung with an Early Repayment Charge? Nick Helm looks at the current options available to buy to let landlords borrowing personally and via a Ltd company.

An Early Repayment Charge (also known as Early Redemption Charge) is a fee that may become due under the terms of your mortgage if you repay the entire loan early or before a set date. The charge usually ceases once the mortgage is out of its fixed or discounted rate term.

For example, if you select a five year fixed rate it is likely that your lender will expect you to stick to that arrangement for the full five year period. However, if you do decide to repay the mortgage in full before the five years are up it is likely that that the lender will impose an Early Repayment Charge, based on the percentage of loan amount outstanding – either on a straight-line basis (i.e. a charge of 5% payable throughout the fixed rate term), or on a reducing basis (5% in the first year, 4% in the second year and so on).

Don’t despair though… if you think you may want to pay off your mortgage, or perhaps just want more flexibility there are buy to let mortgages available without ERCs including:

Borrowing in your personal name:

  • 3.09% fixed for 5 years* (4.3% APR)
    No ERCs
    Lender fee £1,999.
    Up to 75% LTV
    Get a Quote

Borrowing via a limited company:

  • 3.49% variable for loan term** (3.7% APR)
    No ERCs
    Lender fee £1,999
    Up to 75% LTV
    Get a Quote

And something a little bit different…

One useful compromise option is available through Axis Bank which is currently offering:

  • 3.68% fixed for 5-years*** (5.1% APR)
    But the ERC period is only for 3 years – details of ERCs 5% in year 1 then 4% in year 2 and 3% in year 3 only
    Lender fee 2%
    75% LTV
    Get a Quote

 
This products offers the best of both worlds – an assurance that the rate won’t change for five years but no penalty payments in years 4 and 5 should you decide to redeem. Do note, that buy to let mortgages from Axis Bank are only available via a select panel of intermediaries - including us!

Of course these aren’t the only buy to let mortgage products available without ERCs, so do get in touch if you want to talk through the options.

As usual I can be contacted directly on 01732 471608 or via the main line 0345 345 6788.

And finally, do bear in mind that sometimes it makes sense to repay a mortgage early including paying the ERCs! Again – just shout if you want help to work out whether this might be the best route for you.

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*Fixed at 3.09% for 5 years reverting to 4.49% (Lender’s Standard Variable Rate). For purchases and remortgages. Rent to Interest Cover: If the total gross income of all applicants is less than £40k, the ICR is 125%. If the total gross income of any applicant is £40k or more, the ICR is 140%. In all cases there will be a reference rate of 5.5%, or 5% if a fixed rate product of five years or longer is chosen. Like for like Remos: Where each applicant individually has a total gross annual income below £40,000, an ICR of 125% will be applied with a reference rate of 5%. Where any applicant has a total gross annual income of £40,000 or above, or declares they are a higher or additional rate tax payer, an ICR of 140% will be applied with a reference rate of 5%. Early Repayment Charge: Nil. Overall Cost for Comparison: 4.3% APR. Loan to Value: 75% loan to value up to £500,000 loan amount. 50% loan to value up to £1,000,000 loan amount. Lender Arrangement Fee: £1,999 added to loan. Broker Fee: At Mortgages for Business we do not charge clients for initial advice. Our standard broker fee is due on receipt of an Agreement in Principle from the lender, charged at £497 for personal applicants and £597 for applications made by limited companies. We will keep any commission payments made by the lender. Repayment Options: Interest only or repayment. Minimum Income Requirement: No requirement.

 

**Tracker at 3.49% = LIBOR + 3.20 for loan term. For purchases and remortgages. Rent to Interest Cover: Individual applicants = 140% @ 5.5%, Limited company applications = 125% @ 5.5%, Expatriate applications = 125% @ 5.5%, Remortgage (where there is no capital increase) = 125% @ pay rate, where a fixed rate is 5 years or more in duration = 125% @ pay rate, Underlying affordability of a portfolio will be considered against a minimum125% @ 5.5%. Early Repayment Charge: Nil. Overall Cost for Comparison: 3.7% APR. Loan to Value: 75% loan to value up to £500,000 loan amount. Lender Arrangement Fee: 1.75% of the loan amount added to the loan. Broker Fee: At Mortgages for Business we do not charge clients for initial advice. Our standard broker fee is due on receipt of an Agreement in Principle from the lender, charged at £497 for personal applicants and £597 for applications made by limited companies. We will keep any commission payments made by the lender. Repayment Options: Interest only or repayment. Minimum Income Requirement: £25,000 per annum.

 

***Fixed at 3.68% for 5 years reverting 4.80%  (LIBOR + 4.5%, variable) for the remaining term of the mortgage. For purchases and remortgages. Rent to Interest Cover: Personal - 145% @ 5.5% for a less than 5 year term and 145% @ pay rate for 5 years or more - for basic rate tax payers it will be calculated at 125% @ 5.5%. They will accept topslicing Limited Co - 125% @ 5.5% for a less than 5 year term and 125% @ pay rate for 5 years or more - for basic rate tax payers it will be calculated at 125% @ 5.5%. Early Repayment Charge: 5% of the amount being repaid for the first year, then 4% until the end of year 2, then 3% until the end of year 3 from drawdown. Overall Cost for Comparison: 5.1% APR. Loan to Value: 65% loan to value. Lender Arrangement Fee: 2% of the loan amount added to loan. Broker Fee: At Mortgages for Business we do not charge clients for initial advice. Our standard broker fee is due on receipt of an Agreement in Principle from the lender, charged at £497 for personal applicants and £597 for applications made by limited companies. We will keep any commission payments made by the lender. Repayment Options: Interest only or repayment. Minimum Income Requirement: No requirement.

 

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