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Three loan deals for landlords financing refurbs
By Simon Thompson |
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| Property investors may want to look at alternatives to bridging finance for refurbishment projects after warnings about unfair interest charges from the Financial Services Authority (FSA)
The FSA has contacted every regulated bridging lender pointing out concerns about how they calculate interest rates and asking how they intend to compensate borrowers if they have charged ‘retained interest’.
The move has led to mortgage brokers picking up more inquiries about other student letting and buy to let refurbishment options.
Three specialist property investment lenders offer refurbishment loans that cover light building work like:
● Replacing a kitchen or bathroom
● Redecorating
● Fixing damp problems
● Rewiring
● Updating central heating and boilers
● Fitting new windows
● Plastering internal walls
● Rendering or pointing outside walls
The Mortgage Works, the Nationwide buy to let specialist subsidiary, that covers buy to let refurbs but not shared homes like houses in multiple occupation (HMOs) or multi-let blocks.
Aldermore lends up to 70% loan-to-value on licensed HMOs with LIBOR rates currently at 0.514% + 5.4% (5.914%). The lender will load the rate by 1% during building.
Shawbrook also offers commercial loans to property investors that include a specialist mortgage for refurbishment at 70% loan-to-value and LIBOR + 4.95% (5.914%).
Underwriters are strict about offering these loans and often impose strict conditions on borrowers like limiting loan to values.
Typically, a refurbishment mortgage works by offering extra lending against the increased valuation and rent the improvements will add to the home.
So, an investor buying for £120,000 with a 30% deposit might allocate £20,000 to switch the property in to an HMO for improved rental cash flow.
With a proposed £140,000 valuation after the work and a gross rental figure supporting greater borrowing - saying another £35,000, the investor could cover the cost of the refurb and still have an extra £15,000.
Refurbishment mortgages offer cheap borrowing for landlords as no refinancing away from a bridging loan and the costs remortgaging incurs are required.
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New Section 21 rules cause landlord confusion |
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New Section 21 rules cause landlord confusion
New Section 21 rules are causing confusion among letting agents and landlords, says one law expert.
The new rules come into effect from October for tenancies created before October 2015.
Unde |
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