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arjunb

The rise of the 85% LTV BTL mortgage

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hi all,

I've heard that 85% LTV BTL mortgages are becoming more common in the UK lending market. I understand that they are at a much higher rate (usually 4.5%+ for the fixed rate period), but I had a few questions about them. I'd appreciate it if anyone could answer them!

  1. How 'easy' is it to get one? Is it solely for experienced landlords? Who counted as an experienced landlord?
  2. Is it relatively simple to remortgage these mortgages? Does the remortgage process differ between these & 75% LTV BTL mortgages?
  3. Are there differences in terms if you take this mortgage in an SPV or in personal name?
  4. Finally, do you think that such mortgages will become more common & readily available in the future? Perhaps even 85% LTV becoming the norm for BTL?

Thank you!

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Im not sure where you heard they are becoming more common. They where very common but changes in Mortgage Interest Relief has made them rather expensive and the PRA Rental Stress Tests made them available to only the high yielding properties.

Though that is not to say there is not better availability. Many years it was just one lender offering, we now have a few.

18 hours ago, arjunb said:

How 'easy' is it to get one? Is it solely for experienced landlords? Who counted as an experienced landlord?

You do not need Buy-to-Let Experience but you do need to be a homeowner. Though experiance is required for 85% LTV HMO Mortgages.

Its not difficult to get at 85% LTV Mortgage, the main thing is making sure you have good rental income. As the stress test has to reach a larger loan amount.

18 hours ago, arjunb said:

Is it relatively simple to remortgage these mortgages?

Perhaps - there are more lenders available now. Though you should really aim to build up 5% Deposit and get in the more competative 80% LTV space. As there is no guarantee that you or the property, will meat the criteria of the other view offering the mortgage. Leaving you trapped on the SVR (which is not low).

18 hours ago, arjunb said:

Does the remortgage process differ between these & 75% LTV BTL mortgages?

A higher rental stress test. They want to ensure they have good security, given the higher risk.

18 hours ago, arjunb said:

Are there differences in terms if you take this mortgage in an SPV or in personal name?

You do get lower Rental Stress Tests in a SPV than in a Personal Name. Otherwise not much difference in the general sense.

18 hours ago, arjunb said:

such mortgages will become more common & readily available in the future? Perhaps even 85% LTV becoming the norm for BTL?

I would suspect not. We have some competition in the space but most landlords avoid 85% LTV in my experience. You do have some landlords that do use it to their advantage for leveraging and building a portfolio. Though given the higher rates and product fees, even they generally aim to build at least 5% deposit by time the next remortgage comes. Otherwise your net profits will be hit by the fees and rates.

We wrote an article a year or so ago about 85% LTV Buy to Let Mortgages that may answer some of your questions.

The TL:DR of all these questions is that is just the same as other LTV Mortgages. Though reduced choices, higher rates and fees. You will need to have a good rent on the property to make sure the maximum loan the lender offers is 85% LTV.


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3 hours ago, Adam Hosker said:

Im not sure where you heard they are becoming more common. They where very common but changes in Mortgage Interest Relief has made them rather expensive and the PRA Rental Stress Tests made them available to only the high yielding properties.

Though that is not to say there is not better availability. Many years it was just one lender offering, we now have a few.

You do not need Buy-to-Let Experience but you do need to be a homeowner. Though experiance is required for 85% LTV HMO Mortgages.

Its not difficult to get at 85% LTV Mortgage, the main thing is making sure you have good rental income. As the stress test has to reach a larger loan amount.

Perhaps - there are more lenders available now. Though you should really aim to build up 5% Deposit and get in the more competative 80% LTV space. As there is no guarantee that you or the property, will meat the criteria of the other view offering the mortgage. Leaving you trapped on the SVR (which is not low).

A higher rental stress test. They want to ensure they have good security, given the higher risk.

You do get lower Rental Stress Tests in a SPV than in a Personal Name. Otherwise not much difference in the general sense.

I would suspect not. We have some competition in the space but most landlords avoid 85% LTV in my experience. You do have some landlords that do use it to their advantage for leveraging and building a portfolio. Though given the higher rates and product fees, even they generally aim to build at least 5% deposit by time the next remortgage comes. Otherwise your net profits will be hit by the fees and rates.

We wrote an article a year or so ago about 85% LTV Buy to Let Mortgages that may answer some of your questions.

The TL:DR of all these questions is that is just the same as other LTV Mortgages. Though reduced choices, higher rates and fees. You will need to have a good rent on the property to make sure the maximum loan the lender offers is 85% LTV.

Thank you very much for your comprehensive answer Adam - much appreciated!

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