Stepped Interest Mortgage – No monthly payment for three months!

A new scheme has launched to help landlords who are uncertain of making an immediate income from their property. Buy to let consultant, Luke Worrell explains the ins and outs of stepped interest finance and who this product is suitable for.


What is a Stepped Interest Mortgage?


As it says on the tin, a stepped interest mortgage is a rate that increases over a set period. It means that the repayments are lower for a defined period at the start of the mortgage, before stepping up to a higher rate for the remainder of the term.

There are interest only versions of stepped interest mortgage products available for buy to let which give an interest free period, or in real terms, no monthly payments for a fixed period. This is beneficial for a landlord who is buying a new property and wants to keep costs down whilst they find a tenant.


How does it work?


The initial rate will start on a lower rate at the beginning of the term and then increase after a specific time period. For example, we have a product that starts at 0.00% interest for the first three months, allowing you to benefit from no payments while a tenant can be found. After the first three months the interest will then increase for the remainder of the 5-year fixed rate.


What rates are available?


There are currently two rates available for this interest only product. 

Initial rate
Fixed for three months
Then changing to (Fixed 5-year rate) Reverting to the lender’s Variable Rate (after the initial term) Maximum loan to value Overall cost for comparison (APRC) Maximum loan amount
0.00% 2.82% 5.99% variable  60% 5.1% £500,000
0.00% 3.03% 5.99% variable  70% 5.1% £500,000

Rates correct as at 02/04/2019


What makes these products attractive?


Besides the obvious advantage of three months interest free, these products also offer a range of benefits including:

  • No product/arrangement fee
  • Free standard valuations up to £999
  • 10% capital repayments allowed each year without incurring an early repayment charge
  • No minimum income requirement


Who can access Stepped Interest Finance?

Stepped interest finance is available to first time and experienced landlords between the ages of 18 and 85 (applicants must be no older than 74 at the time of application) purchasing in their individual names. No minimum income is required however applicants should be a homeowner. Portfolio landlords with up to 10 properties can also apply.

These rates can be applied to any vanilla buy to let property let on an assured shorthold tenancy agreement to families and professionals.
If you are looking to take advantage of these highly competitive rates and be interest payment free for your first three months do get in touch today as this product won’t be around for long!

Call me today on 01732 471 684 to find out more information or why not drop me an email to see if stepped interest finance is right for you.

 

You may also like to read:

Should you become a landlord?

Personal or Ltd Company ownership of buy to let property?



THE SMALL PRINT

Fixed at 0.00% for 3 months then changing to 2.82% fixed for 5 years reverting to lender’s variable rate (currently 5.99%). Overall Cost for Comparison: 5.1% APRC. Maximum Loan to Value: 60%. Maximum Loan: £500,000. Typical Rent to Interest: 140% at 5.50%. Available to Individual applicants only. Repayment Options: Interest only. Early Repayment Charges: 5% of the amount being repaid until the end of year 1 and year 2, then 4% until the end of year 3, then 2% until the end of year 5 from draw down. Income Requirement: No requirement. Lender Arrangement Fee: Free. Standard valuation fee: Free. Legal fees: Apply.

Fixed at 0.00% for 3 months then changing to 3.03% fixed for 5 years reverting to lender’s variable rate (currently 5.99%). Overall Cost for Comparison: 5.1% APRC. Maximum Loan to Value: 70%. Maximum Loan: £500,000. Typical Rent to Interest: 140% at 5.50%. Available to Individual applicants only. Repayment Options: Interest only. Early Repayment Charges: 5% of the amount being repaid until the end of year 1, and year 2 then 4% until the end of year 3, then 2% until the end of year 5 from draw down. Income Requirement: No requirement. Lender Arrangement Fee: Free. Standard valuation fee: Free. Legal fees: Apply.

 

 

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NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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