If you are a residential landlord looking for a buy to let mortgage in excess of £1m on a single property, how easy is it to find a suitable lender? Chris Longhurst, consultant mortgage broker, explains.
There is a common misconception that very large mortgages on a single property are hard to get in the buy to let market but that really is not the case. In my experience, currently there is quite a lot of appetite for large loans and we regularly work with a dozen or so mainstream and specialist buy to let lenders which offer mortgages of £1m or more.
As always, how we go about choosing which particular lender is right for you depends on your specific circumstances and as you might expect, the majority of lenders operating at this end of the market can only be accessed via a broker. This is because deals of this type tend to be more complex and a broker can do much of the groundwork to gauge suitability, which ultimately saves everyone time and effort.
Whilst using comparison websites or reading lending criteria or finding a rate on our Buy to Let Rate Mortgage Calculator and Rate Finder to determine the maximum loan available is useful, lenders will often consider larger sums on a case by case basis, so it’s always worth getting in touch even if you think you don’t qualify for a particular product.
In theory many lending guidelines quote up to £1m but it is possible to borrow much more, although the loan to value varies from 60-75%. Recently a colleague secured a loan of nearly £6m from a building society for a client who was purchasing an entire block of flats owned on a single freehold title.
In fact, most the very large loans, say £2m+, are for landlords purchasing and remortgaging multi-unit premises which typically cost more to finance but produce higher yields than vanilla buy to lets.
Many HMOs also require the larger loans and we’ve helped lots of landlords secure finance of between £1m and £2m for these transactions. Like multi-units, HMOs are more attractive to landlords because of the higher yields on offer – 10%+ pa in many instances which is a pretty good return.
Bear in mind that the new affordability checks which came into effect on 1 January 2017 mean that if you are borrowing personally you won’t be able to borrow quite as much as previously. As a result many of the larger deals go through via limited companies which are subject to less strict rent to interest calculation.
Borrowing via a limited company can also be easier if you are older but there are a couple of lenders who will consider personal borrowers aged 70+ years.
In my experience, many quirks can usually be accommodated. For example, we recently helped a former ex-pat get a buy to let mortgage for £1m+. Whilst he didn’t have much of a credit footprint in the UK (because he had lived abroad for several years), he could prove his overseas income from payslips which was acceptable to one lender - although not others!.
I hope my ramblings help to dispel the myth around larger buy to let loans and it goes without saying that if you are looking for help in this regard, do get in touch, we can probably help!! My direct line is 01732 471607.
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30th January 2017