It’s always exciting to see a lender bring something new to the table, and it’s even better when they bring in something which we think our clients will love. So, when a very established, long standing, landlord friendly lender announced that they were bringing out a range of short term loans with no arrangement fees, specifically designed for landlords who want to buy a property to refurbish and then let out, our ears pricked up.
Essentially, the mortgage product set is broken into three groups – standard refurb, light refurb and heavy refurb. The scale of work the property requires will determine which of these you are eligible for – the heavier the refurb, the higher the rate. Within each product set (except for the standard refurb), there is the option for rates both with an arrangement fee (these carry a lower interest rate) and without an arrangement fee (these carry a higher interest rate). Invariably the length of time you will have this loan will determine which of these works out best for you.
This product range has some great features for those landlords who are looking to add value to their investment by renovating the property prior to letting. The lender can pre-underwrite the remortgage onto a traditional buy to let mortgage once the works are done, so you know you have an exit lined up post works and plus you will not need to pay a further valuation fee.
Additionally, the heavy refurb product can cater for projects where planning permission, permitted development rights or building regulations approval are required. Including converting a house to a large HMO or a single unit into a block of up to 10 flats.
Other product features to note:
- Rates start at 0.45% pcm
- Minimum loan value is £30,000, up to a maximum value of £1,000,000.
- Fees, including an exit fee applies
- Maximum LTV of 70% - subject to interest repayment method
Refurbishment type Maximum LTV based on initial loan where interest is rolled up Maximum LTV based on end loan balance where interest is rolled up Maximum LTV based on initial loan where interest is serviced Maximum LTV where loan is >£750,000 Standard 70% 75% 75% 70% Light 70% 75% 75% 70% Heavy 65% 70% 70% 65%
- Minimum repayment term – 1 month
- Maximum repayment term
- Standard refurbishment: 6 months
b. Light refurbishment: 9 months
c. Heavy refurbishment: 12 months
- Repayment through serviced monthly payments or gross rolled up interest
In terms of where this product fits in the market, whilst it has some really great features, it is worth noting that the borrower needs to cover the cost of the works from their own funds.
If you are thinking about a project where you don’t have the capital to complete the works, then we do have alternate products which would be better suited.