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Do you expect to see less or more second charge mortgage lenders in 2018?

When a larger deposit is required due to rising rental calculations

Bradley Moore

According to recent industry statistics, house-price growth remains robust and, as a result, demand for rental properties is on the rise.

Rates are tumbling and loan sizes are increasing and in light of this, Brightstar recently had a situation in which a client was looking to purchase a buy-to-let property to add to their existing portfolio within the Kent area.

However, the client required a larger deposit than previously anticipated to meet the first charge mortgage providers’ recently increased rental calculations, as this fell just outside of the mainstream lender’s affordability criteria. 
Therefore, despite rates tumbling and loan sizes increasing, rising rental calculations ultimately means that a larger deposit is required. 

The client also wanted a long-term loan as he didn’t want any time constraints. Based on the client’s personal requirements and circumstances, a second charge mortgage was the most appropriate option as they are generally much quicker than other forms of finance, the criteria are very transparent and they carry very low early repayment charges.

Brightstar identified the best second charge lender to carry out this type of loan and to assess the request in full, while taking a measured approach. Brightstar discussed the case in detail with the chosen lender to ensure the client was given the best outcome possible.

During a period of tumbling rates and increasing loan sizes, Brightstar was able to raise the deposit required. It also secured the loan on the client’s main residence at 55% loan-to-value, although Brightstar does offer up to 80% LTV on buy-to-let and up to 95% for residential portfolios, depending on the individual case. The property value was £1.27m and the loan amount was £165,000 and on this occasion our selected lender partner was able to offer 6.77 times income at a rate of 5.9%. On average, it takes 30 days to complete a loan, but this particular case was completed in just three weeks. 

Case study fact file:
•    Loan amount – £165,000
•    Property value – £1.27m
•    Location – Kent
•    Property – buy-to-let
•    Security LTV – 55%
•    Rate – 5.9%

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